July FOMC and Bank of Japan Meeting Preview

■ The FOMC is expected to keep the policy rate steady at its meeting on the 30th, although a dissenting vote is possible. The meeting will reinforce a wait-and-see stance.  

■ The Bank of Japan is anticipated to raise its economic and inflation outlook at its meeting on the 31st. Whether this leads to an interest rate increase later this year will be of interest.  

 
   Monetary policy meetings are scheduled in both the United States and Japan this week. The Federal Open Market Committee (FOMC) will convene on the 29th and 30th and is expected to maintain the target range for the federal funds rate (4.25-4.50%) for the fifth consecutive time. No dot plot will be released at this meeting, allowing the market focus to be on the policy statement and Fed Chairman Powell's press conference. Since the negative impact of tariffs on the economy is currently limited to certain sectors, no significant changes are expected in the policy statement. Several Fed officials have already explained the rationale for holding the policy rate steady in July. Currently, the U.S. economy remains in a high-inflation environment, with inflation still above the policy target. Amid tariff increases, inflation risks remain elevated. Meanwhile, the labor market remains resilient. Except for Governor Waller and Vice Chairman Bowman, who have consistently advocated for a rate cut in July, most senior Fed officials have indicated a wait-and-see approach given the uncertainty surrounding tariffs’ impact. Before the next FOMC meeting in September, key data releases such as employment figures and the Consumer Price Index (CPI) will be available. Chairman Powell is expected to emphasize during his press conference that these figures will guide short-term policy decisions. Additionally, President Trump's ongoing calls for rate cuts suggest that the press conference will include many questions unrelated to the policy outlook. 

 
   The Bank of Japan will hold its monetary policy meeting on the 30th and 31st. The target for the policy rate—the unsecured overnight lending rate—is expected to stay at around 0.50% for the fourth consecutive time. The meeting will focus on updates to the economic and inflation outlook in the Economic and Price Outlook report and remarks by Bank of Japan Governor Ueda during the press conference. In its April outlook, the Bank of Japan significantly lowered its economic and inflation forecasts, citing uncertainties related to US tariff policies, and postponed its target achievement timeline by one year. However, recent economic data shows persistent high inflation and a rebound in business confidence from earlier lows, suggesting that the Japanese economy is maintaining a moderate recovery overall. The political uncertainty following the crushing defeat in the House of Representatives election on the 21st, which led to Prime Minister Ishiba's resignation, was eased by the US-Japan tariff agreement reached on the 23rd. Market attention now centers on whether the Bank of Japan's outlook will be upgraded. President Ueda has historically delivered cautious comments based on previous outlook reports, but there is speculation on whether he will adjust his tone during this press conference amid current circumstances. He is likely to continue emphasizing the uncertainty surrounding the impact of US tariffs on the domestic economy. However, considering the policy response to the House of Representatives election and the ongoing high domestic inflation, the Bank of Japan is expected to start raising interest rates between October and December. Whether this meeting hints at a rate hike later this year will be a key focus.