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BoJ’s Summary of Opinions from July 30–31 meeting points to an important shift in policy thinking: debate is moving away from how to lift underlying inflation toward 2% and increasingly toward how to stop it from overshooting. One opinion captured change explicitly, saying focus of monetary policy has shifted from “lifting underlying CPI inflation to 2 percent” to “avoiding further upward deviation in underlying CPI inflation.” That does not mean immediate tightening is automatic, but it suggests reaction function is becoming more sensitive to upside inflation risks.

Case for holding policy steady in July rested largely on transmission lags rather than diminishing appetite for normalization. One member estimated that rate hikes take roughly one to one and a half years to weigh on inflation and economic activity, arguing that BoJ should first assess impact of previous increase. Yet several opinions simultaneously stressed that underlying CPI inflation is approaching, or becoming anchored around, 2%, while financial conditions remain accommodative. On that basis, members argued it remains appropriate to continue raising policy rate and reducing monetary accommodation as conditions warrant.

More hawkish part of discussion concerned pace and size of future hikes. One opinion said tightening could proceed “faster than market expectations” if economic activity, prices and financial conditions justify it. Another argued global environment has entered “a new phase” in which BoJ should respond more nimbly to overseas financial conditions and discuss size of a rate hike rather than adhering to a predetermined pace. Most forceful warning was that waiting carries its own risk: if inflation overshoots, BoJ could later be forced into “rapid and substantial” hikes, delivering what member described as a “double shock” to economy and households.

BoJ therefore appears to be moving from normalization driven by confidence in reflation toward normalization increasingly shaped by risk management against excessive inflation. Middle East developments, expansion in AI-related demand, foreign-exchange moves and rising medium- to long-term inflation expectations were all cited as factors requiring close attention. July hold should therefore not be read as retreat from tightening. If upside price risks strengthen while activity holds up, debate may shift quickly from whether BoJ hikes again to how fast — and by how much — it should move.

Key Takeaways

• BoJ’s policy debate is shifting from creating durable 2% inflation toward preventing inflation from overshooting.
• July hold reflected desire to assess lagged effects of previous hike, with one opinion estimating transmission takes around one to one and a half years.
• Several members still judged financial conditions accommodative and argued BoJ should continue raising policy rate as underlying CPI approaches 2%.
• One opinion warned pace of hikes could become “faster than market expectations” if economic activity, prices and financial conditions justify it.
• Debate is also broadening from timing to size of future hikes, with one member saying BoJ has entered a “new phase” requiring more nimble policy.
• Strongest hawkish argument was that waiting too long could force rapid and substantial hikes later, creating a “double shock” for economy and households.
• Middle East developments, AI-related demand, foreign-exchange moves and rising medium- to long-term inflation expectations are key upside risks to watch.

Full BoJ Summary of Opinions here.

China’s consumer inflation slowed more than expected in July, but underlying breakdown was less uniformly weak than headline suggested. CPI eased from 1.0% to 0.5% y/y, below 0.8% consensus, while monthly CPI improved from -0.3% m/m to -0.1%, still missing expectations for a 0.2% increase. Food prices fell -1.5% y/y, while non-food inflation stood at 0.9%. Goods prices rose just 0.2% y/y, compared with a firmer 0.7% increase in services.

Monthly figures showed an even clearer split. Goods prices fell- 0.6% m/m, while services rose 0.4%, suggesting weakness was concentrated in merchandise rather than spreading evenly across economy. Food prices were unchanged overall, with pork rising 4.1% and fresh vegetables 1.3%, partly offset by a -3.8% drop in fresh fruit. Among non-food categories, education, culture and recreation rose 1.0%, while transportation and communication fell 2.2%.

Taken together, July data point to uneven rather than outright collapsing price pressure. Weak goods inflation and another negative monthly CPI reading still argue that domestic pricing power is limited, but resilience in services tempers a simple deflation narrative.

Alongside PPI slowing from 4.1% to 3.5% y/y, below 3.9% forecast, figures should leave Beijing room to support growth while keeping focus on whether services inflation can broaden into a more durable recovery in domestic demand.

Data Summary

Key Takeaways

• China CPI slowed from 1.0% to 0.5% y/y in July, undershooting 0.8% forecast, while monthly CPI improved from -0.3% to -0.1% but remained below expectations for a return to growth.
• Headline weakness was not broad-based. Goods prices rose just 0.2% y/y and fell 0.6% m/m, while services prices increased 0.7% y/y and 0.4% m/m.
• Food prices fell 1.5% y/y, although monthly food prices were unchanged. Pork prices rebounded 4.1% m/m, while fresh fruit prices dropped 3.8%.
• PPI inflation slowed from 4.1% to 3.5% y/y, also below 3.9% forecast, pointing to easing upstream price pressure.
• Overall picture is one of uneven reflation rather than outright deflation: weak goods pricing and softer producer inflation contrast with firmer services prices.
• Data leave Beijing room to support growth without creating an immediate inflation constraint.

Full China CPI release here (in simplified Chinese).

Canada's labor market delivered a strong upside surprise in July, with employment rising 75.1K, far above expectations of 17.8K and accelerating sharply from 18.2K in June. Employment rate edged up 0.1 percentage point to 60.9%, while unemployment rate unexpectedly fell from 6.5% to 6.4%, against expectations for no change. That was lowest unemployment rate since July 2024 and marked third consecutive monthly decline, with rate now down 0.5 percentage point since April.

Job gains were also spread across several important private-sector industries. Wholesale and retail trade added 21K positions, finance, insurance, real estate, rental and leasing gained 18K, professional, scientific and technical services added 17K, while construction employment increased 16K. Those gains were partly offset by declines of -15K in public administration and -9.6K in agriculture.

Wage pressures nevertheless continued to cool, with average hourly earnings growth slowing from 3.3% to 2.8% yoy.

Data Summary

Key Takeaways

• Canada added 75.1K jobs in July, more than four times expectations of 17.8K and sharply above June's 18.2K increase.
• Unemployment rate fell from 6.5% to 6.4%, reaching lowest level since July 2024. It has now declined for three consecutive months and by 0.5 percentage point since April.
• Employment rate increased from 60.8% to 60.9%, reinforcing strength of headline employment gain.
• Job creation was relatively broad, led by wholesale and retail trade (+21K), finance and real estate-related industries (+18K), professional and technical services (+17K), and construction (+16K).
• Public administration shed 15K jobs and agriculture lost 9.6K, providing some offset to private-sector strength.
• Wage pressures continued to moderate despite stronger hiring. Average hourly wage growth slowed from 3.3% to 2.8% y/y.

Full Canada employment release here.