BOJ Keeps Rates Steady, Leaves Hike Option Open

The Bank of Japan (BOJ) maintained its policy rate at 1% in an 8-1 vote, following June's hike. The decision was widely expected, but board member Hajime Takata's dissenting vote for a jump to 1.25% indicates that the tightening debate is far from settled.

The BOJ also adjusted its outlook, nudging up growth expectations while trimming near-term inflation forecasts. This combination can be seen as patient on prices, even as the economy appears firmer.

According to SMBC, a major Japanese bank, the bigger message is that officials are keeping the option to raise rates again if inflation risks reappear. A key trigger for this risk may be the yen's value: if it weakens, imported goods become pricier in Japan, pushing inflation up and making a BOJ rate hike more likely.