The Bank of Japan left its policy rate unchanged at 1.0% in July, a widely expected decision after June's 25-basis-point rate hike.
While policymakers opted to pause, the meeting showed that the debate over further tightening is far from settled.
The decision passed by an 8-1 vote, with board member Hajime Takata calling for another increase to 1.25%. His dissent emphasized ongoing concern that inflationary pressures could prove more persistent than expected.
The BoJ said underlying inflation still has the potential to move above its 2% target and will continue monitoring yen movements, global demand, and AI-driven investment for signs of stronger price pressures.
The central bank lowered its FY2026 inflation forecast to 2.5% from 2.8%, partly reflecting government support for household energy costs, while raising its FY2026 growth forecast slightly to 0.6%.
Looking further ahead, the BoJ raised both its FY2027 inflation and growth forecasts, reinforcing expectations that additional rate hikes are still possible. The pace of future tightening will depend on wage growth, domestic demand, and the path of the yen.
Global markets traded cautiously ahead of the U.S. Nonfarm Payrolls report, with recent weak labor data keeping pressure on the dollar and lowering expectations for a September Federal Reserve rate hike.
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US Job Cuts Drop to Two-Year LowUS employers announced 33,429 job cuts in July, the lowest monthly total in two years. Layoffs fell 27% from June and were 46% lower than in July 2025, pointing to continued resilience in the labor market despite ongoing structural changes.
Detail Dropping Oil Prices Supported Markets (08.06.2026)Global markets traded with a risk-on tone as easing Middle East tensions and weaker U.S. labor data reduced expectations for aggressive Federal Reserve tightening.
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