The Central Bank of Japan is expected to assess the impact of the June hike
On 28 July, the Central Bank of Japan may suspend action this week in order to assess the impact of the earlier upward adjustment of policy interest rates to the highest level in 30 years. The market will closely follow the Bank ' s latest economic and inflation projections and will seek out clues about the timing and pace of future action. It is generally expected that the Bank of Japan will maintain a policy rate of 1 per cent at the end of its two-day meeting on Friday. At its last meeting in June, the bank raised interest rates to a high of 31 years on the grounds that higher oil prices could lead to potential inflation above the target of 2 per cent. Despite persistent concerns about inflation, the determination of the Central Bank of Japan to further tighten its policy has not changed. Markets have included expectations of higher interest rates at least once before the end of the year. While the uncertainty in the situation in the Middle East has led to a further rise in crude oil prices, Central Bank of Japan policy makers consider the risk of a significant downturn in Japan to be low. They expected that the Government of Japan would ensure sufficient energy supply by bypassing the Strait of Hormuz. Moreover, the weakness of the yen remains one of the main factors influencing Japan ' s price trends, not only increasing the burden of already high energy prices, but also likely further pushing up import costs. According to Barclays economists, the Central Bank of Japan could be forced to raise interest rates as early as September in the event of a sharp fall in the yen and the Japanese authorities’ failure to contain it through exchange-rate interventions. Kim Xian
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