Bank of Japan Expected to Hold at 1% With Yen Near 40-Year Low

The Bank of Japan is widely expected to leave its benchmark interest rate unchanged at 1% when its two-day policy meeting concludes, a tactical pause following June's landmark hike to a level last seen in the mid-1990s. Attention is centred less on the rate itself than on the quarterly Outlook Report published alongside the decision, which economists expect to upgrade Japan's growth forecast for the current fiscal year to around 0.8%, up from 0.5% projected in April, supported by robust artificial intelligence demand and resilient business sentiment. Inflation projections are likely to be trimmed slightly to reflect energy subsidies, while longer-term price expectations remain anchored near the 2% target. The backdrop is a Japanese yen that has slid to its weakest level against the US dollar in roughly 40 years, trading near 163 per dollar, which raises import costs and complicates the central bank's communication. Governor Kazuo Ueda's press conference will be closely scrutinised for hints on whether the next increase could come in October or December, with analysts describing the current hold as a brief pause rather than the end of the tightening cycle.