BOJ Keeps Rates on Hold, But Hints at Hawkish Shift

The Bank of Japan is widely expected to maintain its policy rate at 1.00% on Friday, following a 25bp rate hike in June.

Policymakers are likely to focus on Governor Kazuo Ueda's guidance and the quarterly Outlook Report, which will provide insights into the central bank's projections for inflation and growth.

The BoJ is expected to retain its warning that inflation could overshoot the 2% target, despite easing concerns over a severe economic impact from Middle East tensions.

Market participants are pricing in another rate hike by year-end, with December remaining the base case for the next increase. However, September or October could emerge as live meetings if inflation proves more persistent or the yen resumes its decline.