Bank of Japan likely to keep policy steady next week while reiterating 2% inflation overshoot warning but signaling reduced urgency.
The Bank of Japan is expected to hold interest rates at 1% during next week’s policy meeting, maintaining its warning about inflation overshooting the 2% target but adopting a more measured tone. The shift reflects a view that acute geopolitical risks have eased, with focus now on how firms pass cost increases to households rather than immediate oil price shocks.
In April, the BOJ warned of heightened inflation risks, but analysts note the current stance suggests continuity rather than a hawkish pivot. Markets still anticipate a rate hike to 1.25% between October and December, though the yen’s near 40-year lows may draw more attention to financial conditions and currency depreciation signals.
Japan’s core CPI rose 1.6% in June, matching forecasts, while USD/JPY remained little changed. The central bank’s report is likely to emphasize inflation risks but with less urgency than three months ago.