Weak Yen Keeps Bank of Japan on a Gradual Tightening Path

The Bank of Japan is under continued pressure to press ahead with gradual rate increases as a weak yen inflates import costs and keeps underlying inflation firm. After the central bank raised its policy rate to 1% in June, the highest since 1995, board members have signalled a bias toward further tightening toward a neutral level, with markets debating whether the next move comes as early as the autumn. The yen has remained soft, trading around 160 per dollar, and some forecasters have turned more bearish, with one major bank revising its 12-month projection to 165 per dollar, among the weakest calls on the street. A cheaper currency boosts the competitiveness of Japanese exports but raises the cost of imported energy and food, squeezing households and complicating the government's efforts to cushion the impact through subsidies and supplementary spending. Governor Kazuo Ueda has stressed a flexible, data-driven approach, saying future hikes depend on whether inflation is sustainably heading toward the 2% target, while cautioning that global trade tensions and volatile energy prices remain key uncertainties. Japanese equities have held near record highs even as bond yields have crept up.