A former BoJ policymaker, Makoto Sakurai, told Reuters that the BoJ will likely delay rate hikes until at least next March as they deal with US tariffs. This follows the higher tariffs that Trump is expected to place on Japan from August 1 and lack of progress in negotiations.
The BoJ indeed said many times that they are waiting for some clarity on US-Japan trade negotiations and a trade deal before considering raising rates. The trade deal for the central bank is now the priority and inflation comes second.
For JPY traders, the next big catalyst will be the US-Japan trade deal. That will certainly raise the probabilities for a rate hike coming sooner than currently expected and give the JPY a boost (at least in the short term).
We have the House of Councillors elections in Japan on July 20 and the Trump’s August 1 deadline. That is the window when a trade deal might happen.
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