The Bank of Japan is expected to leave its short-term policy rate unchanged at 0.5% following its two-day meeting ending Friday, with the decision due between 0230–0330 GMT. Governor Kazuo Ueda will hold a press conference later in the morning, where markets will be looking for signals on how tariffs and U.S. economic weakness are shaping the path toward future rate hikes.
Analysts say the BoJ is unlikely to resume tightening in October as uncertainty grows around the impact of U.S. President Donald Trump’s tariffs and slowing American growth on Japan’s fragile recovery. Exports have already shown strain, and corporate earnings and wage prospects are seen at risk.
A Reuters poll shows economists split on the timing of the next 25bp hike, with most expecting it by early 2026. While some hawkish board members highlight the dangers of keeping borrowing costs negative in real terms given sticky food inflation and a tight labour market, others urge caution until the tariff fallout becomes clearer. Japan’s inflation has run above the BoJ’s 2% target for more than three years, led by higher rice and food prices.
Political factors also cloud the outlook, with the ruling party preparing for an October 4 leadership contest after Prime Minister Shigeru Ishiba announced his resignation. Ueda is expected to warn of ongoing uncertainty while reiterating that the BoJ remains committed to its gradual exit from ultra-loose policy.
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