The Bank of Japan (BOJ) is expected to keep interest rates unchanged at its upcoming policy meeting, despite mounting inflation and the yen’s persistent depreciation against major currencies. As inflation pressures continue to build, Japan’s central bank faces a delicate balancing act: addressing rising consumer prices without triggering further weakening of the yen.
The BOJ has held onto its ultra-loose monetary policy as a means of supporting economic growth, diverging from other central banks that have raised rates to counter inflation. However, with inflation now gaining momentum, the policy’s sustainability is under scrutiny, especially as the yen continues to depreciate. A weaker yen has amplified import costs, exacerbating inflationary effects on households and businesses.
Analysts note that while the BOJ is unlikely to shift its current stance, pressure is mounting for a policy adjustment if inflation persists and the yen’s slide continues. For now, markets will be watching BOJ Governor Kazuo Ueda’s statements closely for any hints of a policy shift, as Japan navigates an increasingly challenging economic landscape.
