ING: Tokyo inflation cools but remains high, Bank of Japan's interest rate hike path unchanged

Jin10 data reported on July 25, economists at ING stated that although inflation in Tokyo declined in July, it remains at a high level sufficient to support the normalization of the Bank of Japan’s policy. Despite the Japanese government’s measures to stabilize prices showing initial results, core inflation pressures in Tokyo remain high. “Even so, we expect the Bank of Japan to hold steady next week,” she noted. Market focus has therefore shifted to the quarterly outlook report and comments on the US trade protocol. ING expects the Bank of Japan to raise its core inflation forecast excluding energy for fiscal years 2025 and 2026. The institution believes that the US-Japan tariff protocol is unfavourable for the economy, but the central bank may welcome the elimination of uncertainty from the protocol. She stated, “This is a difficult choice, but we still maintain that October is the most likely time for an interest rate hike.”