Shafaqna English– On Friday(31 Jul 2026), the Bank of Japan opted to leave its benchmark interest rate unchanged. However, in an unprecedented move, it issued a formal warning that core inflation could potentially rise above the central bank’s established target.
This marks a significant shift in tone and is widely seen as a clear signal that additional rate hikes are on the horizon—especially following the government’s recent intervention in the foreign exchange market to support the yen.
The central bank further pointed to strong worldwide demand for AI-driven products and services as a key source of upward pressure on prices.
Additionally, it assessed that fears surrounding the Middle East conflict’s negative impact on the global economy have been subsiding. By highlighting these factors, the BOJ made it clear that its primary concern now lies with inflation risks, which it believes may soon necessitate higher borrowing costs.
Dollar in wait-and-see mode