BoJ Hawkish Signaling Takes Center Stage Ahead of Rate Decision

The Bank of Japan's upcoming rate decision on Friday is expected to be overshadowed by its potential hawkish signaling due to inflationary pressures and the yen's depreciation. The country's annual inflation stood at 1.7% in June, with core inflation accelerating to 1.6%, driven by high oil prices.

Marcel Thieliant, head of Asia-Pacific at Capital Economics, believes that the BoJ will face downside risks to economic activity and is preparing for a rate hike in October due to the Japanese yen's depreciation.

Ahmad Assiri, market strategist at Australia-based Pepperstone, expects the BoJ to maintain a slightly hawkish tone, supported by price pressure, good wage growth, and the continued impact of a weaker yen on prices.