BOJ Watch

Research evidence excerpt

BOJ Watch

Global Markets Research

31 July 2026BOJ Watch

Economics - Japan

Our new main scenario pictures a rate hike in October; still Research Analysts

little home-grown inflationary momentum Japan Economics

Kyohei Morita - NSC

Low probability of a rate hike in September; July meeting outcome looks kyohei.morita@nomura.com

like a “hawkish hold” +81 3 6703 1395

Uichiro Nozaki - NSC

• The BOJ left its policy interest rate unchanged at its July MPM. The decision came as uichiro.nozaki@nomura.com

no surprise. The BOJ’s latest Outlook Report notes specifically that “there is a risk of +81 3 6703 1284

underlying CPI inflation deviating upward to a level above the price stability target of 2

Yuna Minegishi - NSC percent.” This is the first time that this prospect has been mentioned in the Outlook yuna.minegishi@nomura.com

Report, although BOJ Deputy Governor Shinichi Uchida—acting in BOJ Governor +81 3 6703 1287

Kasuo Ueda’s stead—did mention this risk during his post-meeting press conference

Japan Rates Strategy after the last MPM, in June.

Mari Iwashita - NSC

• We update our forecast scenarios for BOJ monetary policy. In our new Main Scenario mari.iwashita@nomura.com

(60% probability), we look for three rate hikes, in October 2026, March 2027, and July +81 3 6703 3842

2027. This scenario takes into account the risk of further yen weakening and the risk

of a renewed rise in the price of crude oil. Our previous main scenario is now our Risk

Scenario A (30% probability), in which we picture rate hikes in December 2026 and

June 2027. We also newly add a Risk Scenario B (10% probability) in which the yen

weakens even more sharply, pressing the BOJ to hike its policy interest rate in

September 2026, with another hike coming in January–March 2027 and then another