The Bank of Japan is expected to keep its short-term policy rate at 0.5% at Thursday’s meeting:decision due between 0230–0330 GMT / 2230 - 2330 US Eastern time (on Wednesday 30 July)but may present a less pessimistic outlook, potentially paving the way for rate hikes later this year.The shift in tone follows easing trade tensions after Japan’s recent agreement with the U.S. and a broader U.S.–EU deal, which has improved prospects for Japan’s export-driven economy. Still, the BOJ is expected to caution against lingering uncertainty, particularly regarding the delayed impact of U.S. tariffs.Last week Deputy Governor Uchida said the U.S.–Japan deal reduced uncertainty, but concerns remain over the timing and broader effects of U.S. trade policy on the global economy.Markets will be closely watching the BOJ’s quarterly outlook report The BOJ is likely to:Raise its inflation forecast for fiscal 2025, reflecting continued food price increases (e.g. rice).Adjust its stance on risks to the inflation outlook, potentially dropping its current "downside risks" view.Maintain its projection that inflation will stably hit the 2% target in the latter half of its forecast period through fiscal 2027.Current BOJ projections (from the May 1 Outlook report):2025 core CPI: 2.2%2026: 1.7%2027: 1.9%---Governor Ueda’s press conference will follow at 0630 GMT (0230 US Eastern time) for further clues on the next rate hike. This article was written by Eamonn Sheridan at investinglive.com.