–Data Calendar Thin Until Sept. 28 Week When BOJ’s Tankan Survey Set to Show Manufacturer Sentiment Improved Sharply in Q3 on Global AI Boom
By Max Sato
(MaceNews) – The coming week is quieter on the economic policy and data fronts after the Bank of Japan followed up on its June rate hike on Friday to raise the short-term interest rate target to a 31-year high of 1.25% from 1%, lifting it into an estimated range of 1.1% to 2.5% that is considered neutral to economic activity.
The markets are closed from Monday through Wednesday for the Silver Week public holidays. It is a rare occasion for the Respect for the Aged Day (the third Monday of September) and the Autumnal Equinox Day (always Sept. 23) to line up nicely together, creating a five-day long weekend for people who don’t work on the weekends.
This has raised hopes for higher consumer spending among the operators of hotels, restaurants, theme parks and others in the tourism and leisure industries, as shown in the monthly Economy Watchers Survey for August released earlier this month. Since then, weather forecasters have warned that rainstorms will hit some eastern Japan regions in the first half of the holidays, leaving the outlook for retail stores and service providers uncertain.
Trading in the dollar-yen currency market during the holiday-studded week is expected to be thin and choppy, which in turn could lead to volatile moves in either direction. The Ministry of Finance took advantage of such market conditions during Japan’s Golden Week holidays from late April to early May and conducted rounds of currency intervention to sell dollars for yen. A rare joint dollar-selling market intervention by the Japanese and U.S. governments in late July left the impression that the two allies are serious about correcting the yen’s depreciation to the level unseen in nearly four decades.
This time, there are signs that the MOF wanted to let market participants know that it was prepared to take action if the yen were to drift lower against the dollar further after gaining some lost ground in recent trading.
The public broadcaster NHK reported that the BOJ, on behalf of the MOF, checked the dollar/yen exchange rates with currency traders during the New York hours on Friday, prompting the dollar to slip back after rising through ¥158 from just above ¥156. Earlier during the Tokyo hours on Friday (from late Thursday to early Friday eastern time), the yen was sold after the BOJ board decided to raise interest rates in a 7 to 2 vote, instead of unanimously, and Governor Kazuo Ueda was cautious about predicting the pace of further rate hikes at a post-meeting news conference, NHK said.
But the governor made one thing very clear: The nature of the bank’s raising rates has changed.
“Until now, the underlying inflation rate has been seen as below 2%, so in a way the aim of our short-term policy has been to raise it,” Ueda said. “By contrast, now that the underlying inflation rate is nearing 2%, it is important to stabilize inflation at around 2% by preventing the risk of inflation exceeding the 2% price stability target from materializing and having adverse effects on the economy.”
“In this sense, I think the phase of our policymaking has shifted,” said the governor. This means the process of normalization launched in March 2024, when the bank dropped the negative interest rate policy and terminated its yield curve control regime, is being replaced by a more conventional monetary policy framework of raising interest rates to cool off inflationary pressures and lower them to support economic growth.
The bank’s sixth rate hike in the current cycle at its Sept. 17-18 was widely expected and followed no change in July and a 25-basis point (0.25 percentage point) rise in June. The board accelerated the pace of its policy adjustment to a three-month interval from what was previously believed to be every six months or twice a year.
Ueda denied that he and his colleagues have a fixed idea of how often they should raise rates and stressed that the policy rate is set “one meeting at a time.”
He also said it is hard to predict how far the BOJ’s policy interest rate will rise in the current cycle, adding the terminal rate can be determined only after the job is done.
On the possibility of raising rates by a larger 50 basis points, instead of the current gradual pace of 25 basis points at a time, Ueda said, “I think there are various possibilities depending on price developments, so I cannot rule out certain methods in advance.” What is important for the bank is to conduct thorough analysis and take action “in a timely manner,” he added.
Asked further about whether the BOJ may need to conduct a large-size or back-to-back rate hike, Ueda replied that those actions are usually taken when there is a risk of inflation rising fast beyond target or it is already above target, as seen in Europe and the United States in 2022 and 2023. “We are making various pre-emptive adjustments now so that as a result, we can reduce the possibility of being forced to raise rates rapidly that would create unexpected circumstances for the economy and markets,” he said.
Asked about the impact of policy decisions by other major central banks, the governor said he would keep a careful watch on their moves which “have effects on prices in Japan through various routes including the foreign exchange channel.”
In theory, higher interest rates in Japan help support the yen’s value but the U.S. Federal Reserve also conducted its first rate hike in more than three years on Wednesday to bring inflation back down to target, which will keep the gap little changed between the bond yields in Japan and those in the United States, possibly leaving the yen generally weak.
There are no major data releases in Japan in the coming week but the following week will be busy with a series of end-month data and the BOJ’s Tankan business survey. August sales at department stores and supermarkets on Friday will provide some insights into how weather and calendar factors affected spending patterns.
Retail sales are expected to post their sixth straight year-on-year rise in August but its pace is seen slowing from a downwardly revised 3.7% in July as massive rainstorms caused casualties and damage to many homes in Chiba, east of Tokyo, dampening foot traffic at retail outlets in the prefecture. Industrial production is expected to rebound on the month in August, backed by solid demand for chip-making equipment, computers and vehicles, after posting its first drop in four months in July (revised down to -0.2% from +0.1%).
The Tankan survey is forecast to show sentiment among manufacturers, large and small, improved sharply in the September quarter from June, thanks to the global boom to develop artificial intelligence, while firms in the non-manufacturing sector were more cautious. These indicators suggest that the cumulative effects of the BOJ’s gradual rate hikes have had little negative effects on sales and business investment.
Monday, Sept. 21
– Japanese markets closed for the Respect for the Aged Day public holiday.
Tuesday, Sept. 22
– Japanese markets closed for an additional Silver Week public holiday.
Wednesday, Sept. 23
– Japanese markets closed for the Autumnal Equinox Day public holiday.
Friday, Sept. 25
1400 JST (0500 GMT/0100 EDT Friday, Sept. 25) The Bank of Japan releases its core measures of consumer price index for August. The BOJ excludes institutional factors: the effects of sales tax rate changes, free education, fuel and utility subsidies, reduction in mobile phone charges in 2021 and travel subsidy programs during the pandemic.
Data from the Ministry of Internal Affairs and Communications released on Sept. 18 showed that Japan’s consumer inflation was steady to slightly easier in August, with all three key measures staying just under the bank’s 2% target, as utility and fuel subsidies caused overall energy prices to dip again after posting their first rise in many months in July while processed food price markups slowed.
The core CPI annual rate unexpectedly eased slightly to 1.7% after accelerating to a six-month high of 1.8% in July and rising to 1.6% in June from 1.4% in May. It remains tame compared to a recent peak of 3.7% hit in May 2025.
The annual rate of the total CPI was steady at 1.9% after firming to a seven-month high of 1.9% and edging up to 1.6% in June from 1.5% in May. Overall inflation has come down gradually from 4.0% at the start of 2025.Underlying inflation, as measured by the core-core CPI that exclude fresh food and energy, also stood at 1.9% after rising to 1.9% in July and easing to 1.7% in June from 1.8% in May. It is well below the recent peak of 3.4% reached in June 2025.
Last month, the BOJ’s analytical data showed that its core CPI measure (excluding fresh food and institutional factors) rose 2.3% on the year in July under the new 2025 base year, slowing from 2.6% recorded in each of the previous two months and 2.7% in April. The annual rate of the government’s core CPI (excluding fresh food) continued to accelerate to 1.8% in July from 1.6% in June and 1.4% in May
as overall energy prices posted a slight gain after months of drops and the recent trend of easing processed food price markups has slowed.
The BOJ’s another core measure, the CPI minus fresh food, energy and institutional factors, picked up to a 2.2% rise in July after easing to 2.0% in June from 2.1% in May. The annual rate of the government’s core-core CPI (excluding fresh food and energy) also rose to 1.9% after easing to 1.7% in June from 1.8% in May.
Friday, Sept. 25
1400 JST (0500 GMT/0100 EDT Friday Sept. 25) The Japan Department Stores Association releases August sales.
Friday, Sept. 25
1400 JST (0500 GMT/0100 EDT Friday Sept. 25) The Japan Chain Stores Association releases August sales.
Tuesday, Sept. 29
TBA – The Cabinet Office releases the government’s monthly economic report for September. The August report was released at around 1630 JST on Aug. 27 (0730 GMT/0330 EDT the same day).
Wednesday, Sept. 30
0850 JST (2350 GMT/1950 EDT Tuesday, Sept. 29) The Ministry of Economy, Trade and Industry releases preliminary August industrial output, the outlook for September, October.
Wednesday, Sept. 30
0850 JST (2350 GMT/1950 EDT Tuesday, Sept. 29) The Ministry of Economy, Trade and Industry releases preliminary August retail sales.
Thursday, Oct. 1
0850 JST (2350 GMT/1950 EDT Wednesday, Sept. 30) The Bank of Japan releases the September quarter Tankan business survey.
Thursday, Oct. 1
0850 JST (2350 GMT/1950 EDT Wednesday, Sept. 30) The Bank of Japan releases the summary of opinions from the Sept. 17-18 meeting.
Friday, Oct. 2
0830 JST (2330 GMT/1930 EDT Thursday, Oct. 1) The Ministry of Internal Affairs and Communications releases September Tokyo CPI.
Friday, Oct. 2
0830 JST (2330 GMT/1930 EDT Thursday, Oct. 1) The Ministry of Internal Affairs and Communications releases the August unemployment rate.