The Bank of Japan continues to signal a cautious but persistent path toward policy normalisation, indicating that it will raise interest rates further if the economy and inflation evolve in line with its projections. While the Bank asserts that underlying inflation remains below target for now, the BOJ expects it to gradually accelerate, supported by a moderate recovery in consumption, a continued cycle of rising wages and prices, and a gradual pick-up in medium- to long-term inflation expectations. However, the central bank emphasises the need to remain data-dependent, with no pre-set course, and notes that real interest rates remain at historically low levels.At the same time, the BOJ sees significant downside risks from global trade policy uncertainty, lingering effects from higher food prices, and weak export and output momentum. While fiscal expansion in the U.S. and Europe could offer some uplift to global demand, the BOJ warns that protectionist trade measures may weigh on growth and potentially shift the broader trend in globalisation. Taken together, these signals suggest the BOJ is not in a rush to tighten further but is laying the groundwork for a potential rate hike toward the end of 2025 or into early 2026, contingent on the macroeconomic environment stabilising and inflation dynamics aligning with its targets.Full post on the statement and report is here:BOJ leaves short term at 0.5%, as expected This article was written by Eamonn Sheridan at investinglive.com.