BOJ to stand pat with Ueda back in spotlight
All 52 economists surveyed by Bloomberg forecast the BOJ will hold its benchmark rate steady
Published Thu, Jul 30, 2026 · 07:18 PM
[TOKYO] The Bank of Japan is expected to keep interest rates unchanged on Friday (Jul 31), shifting investors’ attention to whether Governor Kazuo Ueda signals that the next rate increase could come sooner than many economists currently anticipate.
All 52 economists surveyed by Bloomberg forecast the BOJ will hold its benchmark rate steady at the end of a two-day gathering as it assesses the impact of last month’s increase to 1 per cent, the highest in 31 years.
That will put the spotlight on updated economic forecasts and Ueda’s press conference in the afternoon.
The meeting comes as markets have grown increasingly convinced that authorities could conduct another hike by October. The yen’s slide to its weakest level against the dollar since 1986 has added to inflation pressures, as Japan imports virtually all of its energy and more than half its food. Investors will be looking out for any indication that officials see upside inflation risks building.
At the same time, Japan’s economy has proved more resilient than the BOJ feared only a few months ago, giving the board scope to continue normalising policy settings.
According to people familiar with the matter earlier this month, some BOJ officials believe underlying inflation is finally coming very close to reaching the 2 per cent target the bank set more than 13 years ago. Against that backdrop, BOJ officials are open to raising rates at a faster pace than the roughly six-month interval a majority of economists have penciled in, depending on how inflation evolves.
Currently roughly half of surveyed economists expect authorities to wait until December for their next move, with about 40 per cent forecasting they’ll act in October. Traders are more confident. Overnight index swaps implied roughly a 74 per cent chance of another hike by October as of 5 pm Wednesday in Tokyo, up from about 50 per cent one day after the June policy meeting.
Board members are likely to discuss raising this fiscal year’s economic growth forecast in updated quarterly projections, according to people familiar with the matter. Economists surveyed by Bloomberg, meanwhile, expect the bank’s median inflation forecast to edge slightly lower.
Political developments have added another layer of uncertainty. Prime Minister Sanae Takaichi’s government revised its annual economic policy guidelines twice this month in an unusual move that underscored its respect for the BOJ’s independence, though many economists viewed the revisions as merely an effort to reassure financial markets.
Takaichi is expected to announce as early as Thursday a two-year cut to the sales tax on food after recent polls showed the first precipitous drop in her approval ratings since she took office in October. While the measure would temporarily lower headline inflation after implementation from April 2027, some economists argue that additional fiscal stimulus could ultimately add to underlying price pressures.
Japan also has to take into account pressures from abroad. The US Treasury Department last week flagged the need for the BOJ to continue policy normalisation as part of efforts to reduce currency volatility in its semiannual report, in which it cited “substantial yen undervaluation.”
Ueda will preside over the meeting for the first time since returning from hospitalisation for treatment of a liver cyst infection. His absence from last month’s gathering made him the first BOJ governor since 2010 to miss a policy meeting. BLOOMBERG
