BoJ Preview: Still Premature for Policy Adjustments

Summary The Bank of Japan (BoJ) is anticipated to maintain a status quo at the July meeting. While some market participants expect the Bank could raise the target rate on the JGB yield, it is still premature, as the core CPI recently softened on the back of a structurally weak inflation pressure. Such adjustment could make it more difficult for the Bank to meet the inflation target, by strengthening the Yen. Therefore, while revising down its inflation outlook, the BoJ is anticipated to re-emphasize its positive economic outlook and to argue that a tighter labor market will raise wages, which would lead to higher inflation.