The Bank of Japan is anticipated to keep interest rates unchanged today. Despite Japan’s August CPI data, which includes inflation numbers for Tokyo, showing figures above the Bank’s 2% goal, no change is expected in the interest rate. Tokyo’s headline CPI for August 2025 was 2.6% year-on-year, matching expectations.
A Nikkei report and a poll indicate the Bank of Japan is likely to maintain the key interest rate at 0.50% during the September meeting. The announcement is expected between 0230 and 0330 GMT (2230 to 2330 US Eastern time), with Governor Ueda’s press conference scheduled for 0630 GMT (0230 US Eastern time).
Economic Calendar in Asia
The economic calendar in Asia on 19 September 2025 includes these events. The data presented is from the investingLive economic data calendar, with times in GMT and prior results listed in the right-most column. The column adjacent to it displays the median expected figures, where available.
With Tokyo’s inflation data coming in at 2.6%, we see that price pressures remain firmly above the Bank of Japan’s 2% target. The central bank is still widely expected to hold its key interest rate at 0.50% in tomorrow’s decision. This creates a clear signal for us that the policy of a weak yen is likely to continue in the near term.
We should therefore consider strategies that benefit from a declining yen, such as buying USD/JPY call options. Looking back, we saw this same dynamic play out after the BOJ cautiously exited negative interest rates in March 2024, a move that failed to stop the yen’s depreciation. Recent data shows Japan’s real wages have been negative for 28 consecutive months, giving the BOJ cover to delay further hikes and letting USD/JPY test fresh highs.
The predictable nature of the BOJ’s upcoming decision has suppressed short-term currency volatility, making options relatively cheap. This could be an opportunity to buy long-dated straddles on the USD/JPY, positioning for a potential policy surprise later in the year if inflation doesn’t cool. We saw significant volatility spikes during past policy shifts in the 2022-2024 period, and the current calm may not last.
Impact on Japanese Equities
This monetary policy stance should also continue to support Japanese equities. A weak yen boosts the earnings of Japan’s large exporters, which has helped the Nikkei 225 gain over 8% since the start of this year. We can look to add to long positions in Nikkei futures or purchase call options to capitalize on this ongoing trend.
The main risk over the next few weeks is not the BOJ’s decision itself, but any change in Governor Ueda’s language during the press conference. We have now seen nationwide core inflation remain above the 2% target for more than two years straight. Any hint that the bank’s patience is wearing thin could cause a sharp reversal in the yen and hit equity markets.
