The Bank of Japan is expected to keep its policy rate unchanged at 1 percent at its monetary policy meeting on July 30 and 31. At the previous meeting in June, the BOJ raised rates for the first time in six months, and it will now assess the impact of that decision. In its Outlook Report to be released at the same time, the BOJ is likely to reiterate its vigilance against upside risks to prices, as the underlying inflation rate approaches the 2 percent target, and signal its intention to continue raising rates going forward. While the economic outlook is expected to be revised up slightly, the price outlook is seen largely unchanged from the previous report in April. The BOJ views that downside risks to the economy have receded due to progress in alternative procurement of critical supplies amid heightened tensions in the Middle East, and that stronger AI-related demand is providing support. On upside price risks, the tail risk of crude oil supply disruptions that was flagged in April has diminished, but upward pressure from alternative procurement costs, AI-related demand, and yen depreciation is expected to be emphasized. With underlying inflation nearing 2 percent, Deputy Governor Shinichi Uchida has said that it is necessary to be mindful of upside risks, and the Outlook Report is expected to maintain vigilance while noting the need to confirm that underlying inflation is firmly anchored in order to achieve the price target. Regarding the dollar-yen exchange rate, which rose above 163 yen for the first time in 40 years, some within the BOJ say the yen's weakness is already within expectations and does not mean upside price risks are rapidly increasing, while others note that financial conditions remain accommodative and, depending on risks, call for rate hikes at intervals shorter than once every six months.