MUFG is forecasting no change in Bank of Japan policy at this week’s meeting, keeping the short-term rate pinned at 0.50%. Analysts at the bank argue Governor Kazuo Ueda will need more time to assess the fallout from U.S. tariffs before signalling when the next hike might come. Attention will centre on Ueda’s press conference (0630 GMT/0230 US Eastern time Friday, September 19, 2025) for any hint of the conditions or timing that could trigger policy tightening, though MUFG sees the October meeting as effectively off the table.
The bank now projects the BoJ’s next move will be delayed until January 2026, reflecting both limited clarity on the domestic data flow and the political calendar, as well as the challenge of gauging how U.S. trade measures ripple through Japan’s economy. MUFG’s stance is informed by the BoJ’s own Outlook Report, which flagged a near-term moderation in growth as overseas economies weaken and corporate profits come under pressure.
While the BoJ expects accommodative financial conditions to cushion the slowdown and for growth to eventually resume, the report also highlighted how headline inflation will likely ease from current elevated levels. The CPI is projected at 2.5–3.0% in fiscal 2025, falling back toward 2% by 2027, with underlying price pressures described as sluggish amid weaker activity. MUFG notes these official projections, coupled with the downside risks to growth the BoJ itself acknowledges, leave little room for a rate hike this year.
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If MUFG is on the right track these are the likely market implications:
- FX (JPY): Delayed tightening bias reinforces yen softness; investors will watch Ueda’s tone closely for any shift
- Rates (JGBs): Extended policy pause should keep yields capped in the near term, limiting volatility.
- Equities: A slower path to higher rates underpins equity sentiment, though weaker growth projections temper the outlook.
- Trade-exposed sectors: MUFG’s emphasis on U.S. tariff risks highlights vulnerability in exporters and global supply-chain plays.
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