🇯🇵 BoJ Holds Rates at 0.5%—But Signals a Shift May Be Coming

Markets tuned in to the Bank of Japan’s policy meeting this week, looking for clues on whether the recent U.S.-Japan trade deal would influence monetary tightening. The BoJ kept its benchmark rate steady at 0.5%, but surprised some analysts by raising its inflation forecast from 2.2% to 2.7%, hinting at a more upbeat view on the economy.

While no immediate hike was announced, the tone was notably less cautious. UBS analysts now see the possibility of a rate increase later in 2025, should core inflation continue trending above target. Still, the market reaction was muted—USD/JPY hovered below 150, with traders reading the move as a cautious step toward future tightening.

The yen strengthened slightly, and investors are now eyeing October as the next potential inflection point. For now, the BoJ is in “wait-and-see” mode—but the path to higher rates is officially back on the table.