Download App

[Hot News Recap: Bank of Japan Keeps Interest Rates Unchanged, Reiterates Expectations for Further Rate Hikes] 1. As expected, the Bank of Japan (BOJ) kept its policy rate unchanged at 0.5% on Thursday, while raising its economic growth forecast for the current fiscal year and reiterating that it will continue to raise borrowing costs if the economy and prices move in line with its outlook. 2. The quarterly outlook report showed that the BOJ slightly raised its GDP forecast for the fiscal year ending March 2026 and increased its inflation forecast for fiscal year 2026. The report maintained the wording from July, expecting core inflation to reach 2% by the latter half of the forecast period ending March 2027, with inflation risks "roughly balanced." 3. Policy board members Naoki Tamura and Hajime Takada dissented from maintaining the interest rate, reiterating their support for raising rates to 0.75%. The BOJ statement emphasized: "If the economic and price forecasts are realized, we will continue to raise the policy rate and adjust the strength of monetary support according to the degree of improvement." 4. Investors are focused on Governor Kazuo Ueda's 2:30 PM press conference, hoping he will provide clues about the timing and pace of future rate hikes. HSBC's chief Asia economist, Fred Neumann, stated, "With high inflation, a robust economy, and increased fiscal support, a rate hike by the Bank of Japan is only a matter of time, and officials may act soon." 5. Despite hawkish arguments that conditions are ripe, doves like Ueda tend to wait for more data to assess the impact of slowing US growth and Trump's tariff policies. New political variables further complicate the decision-making process—the inauguration of new Prime Minister Sanae Takaichi last week, with her loose monetary policy and expansionary fiscal policies prompting the market to postpone expectations of an October rate hike. 6. Previous surveys showed that most economists expect the central bank to raise rates in October or December, with almost unanimous consensus that rates will rise to 0.75% by the end of March. While Ueda hinted that the normalization path remains unchanged, he emphasized the need to be wary of external shocks disrupting the positive wage-price cycle.