Japan Macro Watch: The calm before the hike?

Research evidence excerpt

Japan Macro Watch: The calm before the hike?

Global Research

24 July 2026ab

Japan Macro Watch Economics

JapanThe calm before the hike?

Go Kurihara

Associate Economist

BoJ on hold; focus on inflation assessment go.kurihara@ubs.com

+81-3-5293 3000

We expect no major policy changes at the July 30-31 MPM following June’s hike to

1.0%, with no economists in the Bloomberg survey anticipating another move. Markets

will likely watch whether the addition of reflationist board member Sato shifts the policy

balance. Updated forecasts are likely to show upward revisions to both GDP and CPI,

reflecting resilient growth and yen weakness.The key question is the timing of the next

hike. While our expectation is October, the Bloomberg survey favors December. A crucial

signal will be whether the BoJ maintains its view that underlying inflation risks

overshooting 2%, particularly as medium- to long-term inflation expectations continue

to rise among both households and firms.

Early signs of inflation reacceleration; higher oil prices a key risk

Nationwide core CPI accelerated 0.2ppt to 1.6%y/y in June, driven by a smaller drag

from energy prices. Core-core CPI slowed to 1.7%, its lowest since August 2022, mainly

due to moderating food inflation. However, food prices excluding fresh food and rice

rose 0.4%m/m, sa (4.6% annualized), suggesting nascent signs of reacceleration.

Meanwhile, Brent crude has returned to around $100/bbl, well above our $70 baseline

assumption. If current futures curves are realized, our FY26 and FY27 core CPI forecasts

would rise to 2.2% and 2.5%, respectively.

Household disposable income up 5.4%, reaching historic highs

Q1 household data showed nominal disposable income rising 5.4%y/y, the strongest