GGMA Markets Briefing: BoJ Holds and Upgrades the Outlook, Tokyo Allegedly Intervenes, Korea Posts a Record Rally
The Bank of Japan left its policy rate at 1.00% on Friday and used the forecasts, rather than the rate, to signal that the next move is coming (BBG). The vote was eight to one, with Hajime Takata calling for a back-to-back increase (Reuters). The Quarterly Outlook Report raised the growth projection for the current fiscal year and trimmed the core inflation path, and the Board upgraded its assessment of risks to the economy from skewed to the downside to broadly balanced, while saying risks to prices remain skewed to the upside (BBG). The Bank added that consumer price inflation is likely to move clearly above 2% in the second half of this fiscal year (Reuters).
In equities, the Nikkei rose 4.8% to 64,700, and the CSI 300 gained 1.2%, while MSCI's emerging-market index rose 2.4% (BBG). Korean shares led, jumping a record 15% as SK Hynix and Samsung Electronics both climbed more than 23% (BBG).
Asian bonds were quieter. The Japanese ten-year yield was little changed at 2.81% and the Chinese ten-year held at 1.71% (BBG).
Japanese authorities are believed to have intervened in New York hours on Thursday, sending the currency as much as 3.3% higher against the dollar in its biggest intraday gain since December 2023 (BBG). Finance Minister Satsuki Katayama declined to confirm the operation, saying only that authorities would remain on high alert and respond as appropriate, while the top currency official, Atsushi Mimura, said Japan had received support from the United States that goes beyond simply moral support (BBG). There is speculation that Seoul sold dollars alongside Tokyo, which would make it a rare joint operation (Straitstimes) (BBG). Washington has been unusually explicit. Treasury Secretary Scott Bessent told Fox Business that the yen is very undervalued and has substantially overshot its equilibrium price, and that he is not concerned about it strengthening (LS). Nikkei reported that the government and the Bank of Japan had intervened (LS). Some of the move has since unwound through the Asian session overnight (BBG). The yen weakened 0.7% to 160.68 against the US dollar and the won gave back ground, with the dollar 0.9% higher at 1,436.47 against it (BBG). The political backdrop is part of what the currency is trading. Prime Minister Takaichi's programme for a more assertive Japan is under strain as the yen sinks and approval ratings fall, which is the pressure the Bank is being asked to normalise into (BBG).
Market pricing now carries most of a further Japanese increase by the autumn. The implied policy rate reaches 1.18% at the 30 October meeting and 1.25% by December, so roughly a quarter point of tightening is in the curve by year-end (BBG). The September meeting is priced at about a third of a move.
In the United States, attention has shifted from the decision to the chair. Kevin Warsh has hinted at a new inflation framework, which has unsettled investors who read his market-driven approach as weakening the policy anchor (BBG) (BBG). Wall Street's record short position in fed funds unwound after rates were held (BBG). Treasuries were little moved overnight, with the ten-year yield at 4.65% and the thirty-year at 5.19% (BBG). The dollar index rose 0.4% to 100.22 (BBG).
The data were mixed and the surprises sat in Asia. Tokyo consumer prices rose 2.0% on the year in July against 1.8% expected and 1.7% previously, and the measure excluding fresh food rose 1.9% against 1.8% expected (BBG). Japanese retail sales fell 4.1% on the month against a 1.6% decline expected, and industrial production rose 1.3% against 1.0% expected. China's official manufacturing purchasing managers' index fell to 49.2 from 50.3, below the 50.1 expected and back into contraction, and the non-manufacturing gauge also slipped below the expansion line (WSJ). The People's Bank of China left its daily reference rate for the yuan largely unchanged despite the overnight gains in the currency, which analysts read as an attempt to temper the move (BBG).
In geopolitics, President Trump said a historic agreement had been reached for the complete disarmament of Hamas, and American officials described an implementation plan that would be put into motion over the coming weeks, while cautioning that the deal is conditional and that Israel remains sceptical (LS). Iran was reported to have urged Hamas to delay. The Iranian army separately said it had targeted American military facilities at Kuwait's Ahmed Al Jaber air base, so the two tracks of the conflict are moving in opposite directions at once (BBG) (Reuters).
Commodities were softer. Brent crude fell 1.5% to $87.67 a barrel, and WTI fell 2.2% to $81.75, a third session of decline (BBG). Gold eased 0.5% to $4,080.85 an ounce, holding most of the gain it took from the intervention-driven fall in the dollar (BBG). Copper rose 0.7% and is set for a monthly gain on a tightening supply outlook (BBG).
In company news, Amazon rose after a fifth straight quarter of cloud sales growth, while Apple fell after warning that supply constraints will increase significantly in the September quarter (BBG) (WSJ). SoftBank rose as much as 15%, hitting its daily limit. Sony raised its profit outlook. Citadel bought the equity portfolio of Situational Awareness, the fund run by the former OpenAI researcher Leopold Aschenbrenner, after heavy losses in the artificial-intelligence selloff (WSJ) (BBG). Anthropic disclosed that its models breached three organisations during cybersecurity testing that went awry.
Ahead today: the euro-area flash inflation estimate for July at 11:00 CET, with the headline expected at 2.9% and the core rate at 2.4%, followed by the US employment cost index for the second quarter at 14:30 CET and the final University of Michigan survey at 16:00 CET. Bank of England Chief Economist Huw Pill speaks at 13:15 CET, his first appearance since voting in the minority for an increase on Thursday (LS).
Time Stamp: 31 July 2026, 07:23 CET