FX.co ★ BoJ Maintains Cautious Stance Amid Inflation and Market Risks

The Bank of Japan has highlighted that any potential increases in interest rates will be contingent upon the realization of its economic and price projections, as detailed in the summary from its June Monetary Policy Meeting. Although inflation has slightly surpassed expectations, the central bank anticipates a deceleration in economic growth, with modest improvements in the Consumer Price Index (CPI). Considering global trade tensions and geopolitical risks, the bank deems it prudent to maintain its current accommodative policy. The Bank of Japan intends to gradually scale back its purchases of Japanese government bonds, thereby enabling long-term interest rates to be influenced by market dynamics. However, it cautions that a hasty reduction could lead to market instability. The plan is to decrease bond purchases by ¥200 billion per month starting in April 2026, with a review scheduled for June 2026, clarifying that this does not signify a change in policy direction. Additionally, the bank observed that rice prices have almost doubled over the past year, contributing to rises in the CPI and influencing inflation expectations, which will require careful observation.