Bank of Japan expected to hold rates steady until next year — Reuters

US tariffs narrow the possibilities for the Bank of Japan to hike rates. The import duties are expected to slow down Japan’s economic expansion and add to domestic price pressure, Reuters reports. 

According to Bank of Japan Governor Kazuo Ueda, it will take longer for core inflation to reach the 2% target. This signals a pause in rate hikes to get more detailed information on the impact of the tariffs imposed by the US administration, Reuters says. 

However, the Bank of Japan is likely to stick to its plan of increasing borrowing costs due to persistent food inflation, prospects for wage growth, and concerns about a weaker yen, the news agency notes.

Goldman Sachs projects the Bank of Japan will raise its rates in January 2026. The experts estimate the policy rate could eventually reach 1.5% in the monetary tightening cycle.

Morgan Stanley analysts expect borrowing costs to remain at 0.5% until the end of next year. Yet, the Bank of Japan might raise its rates in September if inflationary pressures intensify or the yen weakens sharply, experts say.