BOJ Holds Rates as Yen Intervention Sparks Rate Hike Bets
The Bank of Japan has announced that it will hold interest rates at their current level of 1.0% on Friday, despite signals that it is ready to continue raising borrowing costs in response to government intervention to support a weak yen.
On Thursday, the BOJ conducted an intervention to buy yen and sell dollars in the New York market ahead of its two-day policy meeting, which concluded with no rate hikes. However, some analysts expect a short-term rate hike to 1.25% by year-end, citing pressure on the yen from import costs.
The BOJ's quarterly forecast is expected to show reduced fears of a hit from the Middle East conflict, leading to increased growth forecasts for fiscal 2026. However, inflation forecasts are likely to be lowered due to subsidies' impact and lower oil costs compared with April levels.