Nikkei: Bank of Japan expected to keep interest rates unchanged at 1% next week, with most committee members inclined to remain on hold, but the probability of raising GDP forecasts is increasing.

(1) According to Nikkei News, the Bank of Japan plans to keep interest rates unchanged at 1% at the policy meeting scheduled for July 30-31. Most members of the nine-member Policy Board are expected to support maintaining the status quo. (2) Although the board members generally believe that the current financial environment remains accommodative and that further rate hikes are needed to stabilize prices, many feel there is no urgent need to raise rates at present. Against the backdrop of heightened tensions in the Middle East and rising oil prices, which pose inflation risks, decision makers are closely monitoring the economic transmission effects following the June rate hike. (3) Some members had previously called for a further rate increase in July, but the majority now prefer to wait for more data for confirmation. The board may raise its real GDP growth projection for the 2026 fiscal year at next week's meeting. The median forecast in April was 0.5%. Recently, improved economic conditions, increased alternative oil resources from the Middle East, diminished concerns over reduced corporate output, and better-than-expected performance in AI-related industries have all supported the growth outlook.