The BOJ’s July Outlook Report suggests that it may raise rates further, while stating that it does not represent a major change in the course of monetary policy. September may also emerge as an option for the next rate hike, with the timing expected to depend on exchange-rate developments.
The Bank of Japan left its policy rate unchanged at its July Monetary Policy Meeting. In the Outlook Report released alongside the decision, the median forecast for core CPI in fiscal 2026 was changed from +2.8% to +2.5%. This is reportedly largely attributable to the government’s measures to ease the burden of energy costs, and the BOJ has not expressed strong optimism about underlying price increases.
At the same time, the Outlook Report once again underscored concerns about falling behind the curve. The BOJ is concerned that monetary policy could lag behind price developments and indicated that it would carefully assess the pace of future rate hikes.
The report also noted that the decline in crude oil prices has reduced the risk of a substantial downside surprise in economic activity and the risk of a substantial downside surprise in prices. However, it explained that the possibility of stagflation has not disappeared and that policy decisions will depend on future economic and price developments.
October is widely viewed as the likely timing for the next rate hike, although the timing could change from October to September depending on developments in the foreign-exchange market. Media outlets are closely watching how monetary policy unfolds in light of the key points in the Outlook Report.