[Bank of Japan Monetary Policy Meeting] Policy Interest Rate Held at 0.5% with Inflation Outlook Raised | Market Fundamentals Analysis | Moneyクリ Monex Securities Investment Information and Media Useful for Money

The policy interest rate remains unchanged, and the inflation outlook for fiscal year 2025 has been revised upwards.

The Bank of Japan unanimously decided at the monetary policy meeting on July 31 to maintain the uncollateralized overnight call rate at around 0.5%.

At the same time, the "Economic and Price Situation Outlook" (Outlook Report), which is presented four times a year, has been published. The real GDP growth rate shows no significant change from the previous forecast made in April, and it is projected to grow by 0.6% compared to the previous year in fiscal year 2025. On the other hand, due to the recent rise in food prices and other factors, the core inflation (consumer price index excluding fresh food) forecast has been revised upward to 2.7%.

Regarding risk balance, the economic growth for the fiscal years 2025 and 2026 is considered to have significant downside risks. As for prices, it is said that they are "generally balanced up and down," and evaluations are made considering uncertainties such as corporate wage and price-setting behaviors, trade policies, and exchange rate trends.

[Chart] Forecast of the Policy Committee Members from 2025 to 2027 Compared to the previous year, %. Note that the values in the <> are the median forecasts of the policy committee. Previous point: April 2025 Source: Created by Monex Securities based on the outlook for economic and price conditions.

The stance of prioritizing fundamental price increases remains unchanged

After the announcement of the meeting results, domestic interest rates rose due to an upward revision of the price outlook and the consciousness of an early rate hike. Although the USD/JPY moved towards a stronger yen, there were no significant movements, and there were indications that market participants wanted to confirm the contents of Governor Ueda's press conference.

The press conference, which started at 3:30 PM, was conducted with the usual careful communication, and while some progress was observed in areas such as tariff policy, it was stated that they will respond "without preconceived notions" while considering the possibility that future data may fluctuate up and down.

Additionally, the upward revision of the price forecast for the fiscal year 2025 reflects the continued high levels of food prices and is not a prediction of future trends. It also emphasizes that this upward revision of the price forecast will not lead to a policy decision to raise interest rates, but rather a commitment to making comprehensive judgments as before. During the press conference, there were questions about the necessity of raising interest rates due to the high headline prices and whether the situation is behind the curve, but at this point, they do not consider those risks to be significant, maintaining a focus on the fundamental rise in prices.

Certain uncertainty alleviation also emphasizes actual data / Does not mention the timing of interest rate hikes, but the market is pricing in a delay.

Without providing a clear answer regarding the timing of the next interest rate hike, the stance taken during the press conference led to a decline in the USD/JPY to the lower 149 yen range, giving the impression that the market is pricing in a cautious approach towards rate hikes. While the current economic situation shows a gradual easing of certain uncertainties in tariff policy, it was indicated that this would not lead to a policy decision. As has been the case traditionally, it is believed that the impact of measured data on the real economy and its ripple effects will be emphasized.