BoJ unwilling to toe government’s line

The regular budget for FY2027 will probably include the largest increase in spending since the early 1990s. However, this partly reflects the government’s aim to incorporate spending previously included in supplementary budgets in the regular budget so overall public expenditure will probably rise less sharply. Meanwhile, BoJ Deputy Governor Himino fell short of explicitly hinting at a rate hike next month. However, the hawkish tone of his speech coupled with strong inflation and labour market figures means that a September rate hike remains the most likely outcome.