Economists at the ANZ Research Department said that recent intervention by the Japanese and US authorities to contain the weakening yen is unlikely to reverse the depreciation trend of the yen, unless supported by a supportive monetary policy. The legacy of Japan's long history of deflation will continue to keep policymakers cautious about raising interest rates, and the Bank of Japan may prioritize avoiding growth risks rather than allowing inflation to be moderately above target. They said that geopolitical developments will be the key to determine the timing of the next policy steps, and if uncertainty surrounding the Middle East crisis persists, further policy normalization will be appropriate. ANZ expects the Bank of Japan to raise policy interest rates in October, but the possibility of a rate hike in September is increasing.

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