MNI BoJ Preview- Sep 2025: Maintain Cautious Stance On Hikes

EXECUTIVE SUMMARY: 

• The Bank of Japan is expected to keep policy unchanged in September, with future decisions hinging on October’s Tankan survey and branch managers’ meeting, which will clarify corporate sentiment and investment trends.
• External risks, particularly the impact of U.S. tariffs and potential weakness in U.S. labour markets, are now the central concern, limiting the urgency for near-term rate hikes despite inflation hovering near 3%.
• Political uncertainty following Prime Minister Ishiba’s resignation complicates the outlook, with leading candidates and opposition parties generally favouring fiscal stimulus and accommodative monetary policy.
• Analysts are split: some see the BoJ at risk of falling behind the curve, while others argue the next meaningful opportunity for a hike could be as late as 2026, depending heavily on wage momentum and inflation sustainability.
• Governor Ueda’s cautious communication style is expected to reinforce market perceptions of dovishness, emphasising flexibility and conditionality rather than committing to a specific tightening timeline.

FOR THE FULL PUBLICATION PLEASE USE THE FOLLOWING LINK: BOJ Preview - Sep 2025.pdf