BOJ and U.S. FOMC in focus, yen at 163 mark, caution mounts over next week's monetary policy

Ahead of next week's BOJ meeting and U.S. FOMC, attention is focused on the policy rate outlook. The June CPI at 1.6% fell short of the target, and the Economic and Fiscal White Paper indicated a continued outlook for rising prices. Long-term yields saw a sharp reversal on speculation of GPIF support, while the sale of Kioxia gave Bain its biggest return ever, as market and corporate activity accelerated.

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BOJ likely to hold steady at meeting, but U.S. FOMC rate hike expectations pose yen weakening risk The BOJ is expected to keep its policy rate unchanged at 1.00% at its July 30-31 meeting. Meanwhile, the probability of a rate hike at next week's U.S. FOMC meeting has risen to 35%, and the U.S. Treasury also published a report calling on the BOJ to raise rates further. 1 2 3

June CPI rises 1.6%, rice falls but coffee and medical costs push it up The Ministry of Internal Affairs and Communications said the nationwide core CPI (excluding fresh food) rose 1.6% year-on-year in June. The rate of increase in food items narrowed, with rice falling 8.7%, but coffee beans surged 23.3% and medical service fees also rose due to revisions to medical fees. 4

Economic and fiscal white paper says too early to declare end of deflation, expects continued price rises The Cabinet Office's Economic and Fiscal White Paper for fiscal 2026, released on July 24, showed that price increases are expected to continue among companies and consumers. It noted that a careful assessment of the impact of the Middle East situation is necessary before declaring a definitive end to deflation. The white paper also included an estimate that rising interest rates would increase the household burden on the working-age population. 5

Long-term yields sharply reverse; market gets ahead on GPIF support speculation After long-term yields surged to 2.9% on July 9, the bond market staged a sharp reversal after Finance Minister Katayama suggested expanding GPIF's domestic bond investments. Actual purchases have not been confirmed, but it is widely believed among market participants that buying was front-loaded in anticipation of future demand. 6

Bain reaps record $17 billion return in Japan PE history from Kioxia sale Bain Capital acquired Toshiba Memory in 2018 for approximately 2 trillion yen. From the sale of Kioxia shares last week, it gained a return of about $17 billion. The amount is said to be among the largest profits from private equity investments in Japan to date. 7