UOB: The Bank of Japan may adopt a cautious approach to interest rate hikes due to dual constraints of political and economic factors.

[UOB: The Bank of Japan's Interest Rate Hike May Become Cautious Due to Dual Political and Economic Factors] Two analysts from UOB's Global Economic and Markets Research Department pointed out in their report that while the Bank of Japan may continue to raise interest rates, it will become increasingly cautious. The analysts stated: "In the short term, market focus will shift to the vulnerability of Prime Minister Shigeru Ishiba's administration following a series of electoral defeats, while Japan is still negotiating trade agreements with the United States." Due to the uncertainty of U.S. tariff policy, the Bank of Japan may keep interest rates unchanged at its July meeting, but is expected to maintain a stance of monetary policy normalization. UOB still anticipates that the Bank of Japan will raise interest rates by 25 basis points to 0.75% at the September meeting, and further increase it to 1.00% in the first quarter of 2026.