The Bank of Japan is expected to keep its policy rate unchanged as it concludes its two-day meeting on Friday. With concerns about the yen’s strength causing market instability, the central bank is likely to maintain a cautious stance. The upcoming Liberal Democratic Party presidential election, which will determine Japan’s next prime minister, could also be a factor influencing the BOJ’s decision.
In July, a surprise rate hike by the BOJ caused significant turmoil in the markets. According to Masamichi Adachi, chief Japan economist at UBS Securities, it will take time to fully assess the impact of this move. As a result, the central bank is likely to err on the side of caution and refrain from any hawkish signals that could further unsettle the markets.