Kazuo Ueda and the Bank of Japan maintain steady policy rates while warning of future core inflation growth.
The Bank of Japan kept its policy rate steady at 1% on Friday in an 8-1 decision. Kazuo Ueda and the board warned that core inflation is likely to accelerate to a level clearly above the 2% target starting in the second half of the 2026 fiscal year. The central bank cited wage increases, rising crude oil prices, and a depreciating yen as primary drivers of inflation. While the rate remained unchanged for now, the bank signaled a continued commitment to raising rates as underlying inflation approaches the target. Analysts suggest that a hike in September or October may occur sooner than the typical six-month interval. The decision follows a recent intervention by Tokyo authorities to address excessive yen weakness. Markets are now looking toward Governor Kazuo Ueda's upcoming press conference for signals regarding the pace of future interest rate adjustments.