Japan: Bank of Japan holds rates in July
Latest decision: At its meeting in late July, the Bank of Japan (BOJ) decided by an eight-to-one vote to hold its policy rate at 1.00%, its highest level since 1995. The move matched market expectations.
Bank in wait-and-see mode: The BOJ’s decision likely aimed to assess the impact of past monetary tightening before hiking rates further. The Bank was likely also keen to wait for more clarity on oil prices, which have been highly volatile of late.
Further tightening remains likely by the end of 2026: Most of our panelists expect one more 25-basis-point hike by year-end, consistent with the BOJ’s belief that core inflation will overshoot the 2% target from September. However, a minority see rates on hold.
Panelist insight: On the outlook, EIU analysts said:
“The bank’s governor, Ueda Kazuo, stated in the postmeeting press conference that the central bank recognised meaningful upside risks to inflation and that financial conditions remained accommodative. We interpret these comments to demonstrate the BOJ’s readiness to accelerate its monetary tightening, and expect the next interestrate increase to be announced at the central bank’s October policy meeting.”