**BOJ Signals Further Rate Hikes**

The **Bank of Japan** voted 7-2 to raise rates to **1.25%**. Further hikes will depend on activity, prices, and financial conditions.

Underlying inflation could exceed the **2% target** as wage growth, rising expectations, a weak yen, higher oil prices, and strong AI-related demand push up selling prices.

The economy is recovering moderately, supported by employment, income growth, and AI-related demand. CPI is expected to move clearly above **2%** from the second half of **FY2026**, while financial conditions remain accommodative.

Governor **Ueda’s** remarks will be watched for clues on the timing and pace of further hikes.

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