Bank of Japan Holds Rates at 1% as Government Steps In to Prop Up the Yen

The Bank of Japan kept its benchmark interest rate unchanged at 1% following its late-July meeting, as widely expected after last month's hike to the highest level since 1995. The decision came in an 8-1 vote, with hawkish board member Hajime Takata dissenting in favour of an immediate increase to 1.25%. Governor Kazuo Ueda struck a firm tone at his press conference, signalling that another rate rise could come as soon as September and warning that underlying inflation was likely to run clearly above the bank's 2% target in the second half of the fiscal year, driven by wage gains, higher oil prices and a weak yen. The meeting followed dramatic overnight moves in the currency market: the yen suddenly surged from around 163 to below 158 against the dollar, a jump that analysts attributed to intervention by Japan's Ministry of Finance, reportedly coordinated with US authorities. The yen had been trading near a 40-year low, and officials signalled discomfort with excessive weakness.