The consensus is that the Bank of Japan will maintain interest rates unchanged on Friday, with the market closely watching for signals of a rate hike in October

According to Zhitong Finance APP, the Bank of Japan is expected to maintain its benchmark interest rate at the policy meeting on Friday, which will lead market participants to continue looking for clues about the bank's potential rate adjustments next month or in December.

Fifty economists surveyed by Bloomberg all indicated that borrowing costs would remain unchanged at 0.5% at the end of the two-day meeting of the Bank of Japan. This meeting comes shortly after the Federal Reserve announced its first rate cut since December last year and signaled two more cuts this year.

The Bank of Japan is expected to raise interest rates in January next year.

The backdrop of this meeting involves various changing factors that may force Governor Kazuo Ueda and his team to pause actions before further analysis. In addition to the long-anticipated resumption of the Federal Reserve's easing cycle, domestic politics in Japan has also been turbulent following Prime Minister Shigeru Ishiba's announcement of his resignation. Additionally, there are global trade issues.

Informed sources indicated earlier that Japanese authorities still need to assess the potential impacts of the U.S. tariffs imposed both domestically and internationally.

However, as speculation about interest rate hikes continues to brew, observers of the Bank of Japan will closely examine any signals from Ueda during the post-meeting press conference. Sources say that Japanese authorities believe it is possible to raise rates again before the end of the year.

Recent data shows that despite manufacturers being affected by U.S. tariffs, the Japanese economy is still moderately recovering, which pushed the Nikkei 225 index to a record high on Tuesday. For more than three years, the cost of living for the Japanese public has been at or above the Bank of Japan's 2% target level, a trend that may continue after data is released on Friday. The data is expected to show that while price growth slowed in August, it remains well above the target set by the Bank of Japan.

As the Bank of Japan has repeatedly stated that it intends to raise rates if its economic outlook materializes, about 36% of analysts in the survey believe that the Bank of Japan may raise rates in October. Nearly 90% of analysts expect a rate hike to occur before January.

Economist Taro Kimura stated: "The Bank of Japan needs to reduce stimulus measures because real interest rates are severely negative, inflation rates are above target levels, and there is stable wage growth to support it. However, the next action may have to wait until October. For now, the turbulent political situation will keep the Bank of Japan on hold temporarily."

In the same week that the Bank of Japan's nine-member committee holds its meeting, several of Ishiba's colleagues in the Liberal Democratic Party officially announced their intention to participate in the party leader election scheduled for October 4. A political figure expected to join the race as a frontrunner in the coming days may influence external perceptions of the Bank of Japan's interest rate trajectory. Sanae Takaichi strongly warned against raising rates during her campaign for party leader last year.

Politically, Ueda may commit to continuously monitoring the impact of government policies on the economy and inflation while avoiding comments on any specific candidates or their policy agendas Policy statements are usually released around noon, and Kazuo Ueda will hold a press conference at 3:30 PM