Daiwa Securities highlights durability of food and beverage price rises as the critical factor for the Bank of Japan’s next policy move.
The Bank of Japan’s next rate hike will depend on whether summer food and beverage price increases prove lasting, rather than its inflation forecast revisions. While the BOJ may slightly trim its FY26 core CPI outlook due to lower crude prices, yen weakness and supply-chain costs keep underlying inflation risks elevated.
Financial conditions remain accommodative despite June’s rate hike to 1%, with bank lending expanding and firms continuing investment. The BOJ’s focus is on how firms set prices and whether households absorb higher costs without reducing consumption.
Daiwa Securities expects the July Outlook Report to confirm conditions for further hikes remain intact, signaling the cycle is not over if price dynamics hold.