Japan Macro Weekly

17 August 2026 Fixed Income | Japan Macro Weekly

Global economy and finance: Weekly watch (17 August)

Yusuke Matsuo Senior Market Economist Review of key indicators and events

Shintaro Inagaki 10–16 August: Events ranked from ※ to ※※※ in ascending order of Senior Market Economist interest Domestic bonds performed poorly for the most part last week. It was reported on the evening of 10 August that the decisive factor behind the coordinated Japan–US forex Yasuhisa Irie intervention was Governor Ueda’s indication at his press conference after the July MPM Market Economist that the Bank was preparing to carry out an early rate hike as early as September. Expectations of an accelerated pace of rate hikes intensified as a result. In the forex Ryosuke Katagi market, the dollar rose against the yen at the beginning of the week, after which USD/JPY Market Economist traded mostly sideways in the 159 range. As of 14 August, the 10y JGB yield was trading in the upper 2.8% range, while USD/JPY was hovering between 159.0 and 159.5.

Shota Amano Economic indicators Market Economist ・ 10 August (Monday) ※ June balance of payments Japan reported a current account deficit of JPY92.3 billion in June, which fell far short of the Bloomberg consensus forecast of a JPY1,521.0 billion surplus and marked a YoY deterioration of JPY1,374.0 billion. A breakdown of the data shows the trade account moving from surplus to deficit, while a smaller travel services surplus resulted in a larger deficit for services trade. The primary income surplus also fell sharply.

※※ July CGPI Japan’s corporate goods price index (CGPI) rose +7.2% YoY in July, falling below the previous-month result (+7.3%) for the first time in five months. The index edged up +0.1% on a month-over-month basis, marking the lowest growth in five months. A breakdown of the data shows positive MoM contributions from “electric power, gas and water” as the impact of rising fuel prices was transmitted with a lag. Meanwhile, “petroleum and coal products” and “chemicals and related products,” which had recently been making positive contributions amid developments in Iran, weighed heavily on the index. Prices of “plastic products,” which are further downstream, continued to rise on a MoM basis and are likely to exert significant upward pressure on consumer prices going forward.

The yen-denominated import price index for July climbed +29.1% YoY, off slightly from a +30.1% gain the month before. Now that crude oil prices have stabilized at lower levels and USD/JPY has fallen since August following the coordinated Japan–US intervention, we expect growth in the import price index to moderate.

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※※※ Summary of Opinions for 30-31 July Monetary Policy Meeting

The 30–31 July BOJ monetary policy meeting was hawkish on the whole despite the eight-to-one vote to leave the policy rate at 1.00%, with strong concerns voiced about upside inflation risks by Governor Kazuo Ueda in his post-meeting press conference as well as in the subsequently released Outlook for Economic Activity and Prices "Box" analysis. The "Summary of Opinions" for the meeting published on 10 August featured almost no calls to tread cautiously on the rate hike front in its closely scrutinized "Opinions on Monetary Policy" section, with numerous comments meanwhile referring to upside inflation risks (with "underlying CPI inflation [already] approaching 2 percent"), a possible acceleration of rate hikes, and a need to "ensure the nimbleness of policy decisions".

Once again the message was generally hawkish, with our impression being that even "mainstream" policy board members are now starting to think harder about the possibility of accelerating rate hikes due to heightened risk of an overshoot in underlying inflation.

Economic outlook (as of 17 August)

Chart 1. Macro team forecasts for Japanese economy (%) By quarter YoY change at end-FY 3Q…