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JP · Government · Bank of Japan · Asia-Pacific

Japan

Limited room for manoeuvre · updated 11 September 2026

What they did

The Bank of Japan held its policy rate at 1.00% in July by an 8–1 vote; it is expected to raise it to 1.25% on 18 September. On 26 August the government unveiled POWERR GX, an energy security package.

Why

In July real wages rose 2.4%, producer prices 7% and lending 10%; the yen is weak and more than 90% of crude oil imports come from the Middle East.

What they must do

It must continue normalisation against a weak yen while sustaining demand in the ultra-long debt market, where the 30-year yield is above 4%.

What comes next

The 17–18 September monetary policy meeting and August national inflation data on 18 September.

Preference

Gradual and predictable rate normalisation.

Observed behaviour

Cautious normalisation that signals in advance the hikes priced by the market.

Sources

  1. ING Think — BoJ preview
  2. IEEJ — Ken Koyama, a Japanese perspective

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