Bank of Japan Expected to Hold at 1% as Yen Sinks Near a 40-Year Low

The Bank of Japan is widely expected to leave its benchmark interest rate unchanged at 1% when its two-day policy meeting concludes on July 31, keeping borrowing costs at their highest since the mid-1990s. Investors are focused less on the rate itself than on the quarterly Outlook Report published alongside the decision and on the language Governor Kazuo Ueda uses at his afternoon press conference. Reports suggest the central bank may upgrade its growth forecast for the current fiscal year to around 0.8% from the 0.5% projected in April, while modestly trimming its inflation projection. The stakes are heightened by the yen, which has slid to its weakest level against the US dollar in roughly 40 years, trading near 163 to the dollar. That weakness raises import costs and complicates Ueda's messaging, as markets look for clues on whether the next rate increase could come in October or December. The BoJ has been gradually normalising policy after decades of ultra-low rates, and officials have signalled a continued tightening bias, though they remain wary of global risks including the conflict in the Middle East.