Masahiko Loo of State Street Investment Management describes the Bank of Japan's cautious approach to its rate hiking cycle. If the political situation in Japan resolves itself, he could see the BOJ hiking by the end of 2025. He says fiscal discipline in Japan will remain, but says an increase in spending will be a good entry point for Japanese bond investors.

Tokyo

The Bank of Japan (BOJ) is holding off on raising interest rates despite stable economic growth and sustained inflation. Analysts cite lingering political uncertainty, particularly the declining popularity of Prime Minister Ishiba, as a key reason for the BOJ's cautious stance. 

While some economic uncertainties, such as tariffs and currency fluctuations, have eased, the BOJ is closely monitoring the domestic political situation before making any policy moves. Fiscal stimulus measures are being considered by the government, but significant spending increases are unlikely due to ingrained fiscal discipline. Market expectations suggest that any rate hikes will be gradual and contingent on greater political stability.

Bank of Japan 'don't have political capital' to hike interest rates

We take a step back and look at all the fundamentals in Japan. The growth is looking okay sanguine. We have headline inflation, three in three actually, so 3% inflation for more than three consecutive years in Japan. And these are all pretty much aligned for a higher base race in Japan. But the reason why BOJ is still behind the curve is because there's several uncertainties they have raised year to date. Number one is tariff. Number two is US dollar yen level. And number three is obviously domestic politics development. And as of now, I think the tariff front is we have confirmed that Japan is not going to get the worst of the whole case scenario. So the tariff front and US dollar yen is gone. The uncertainty there is somewhat evaluated now. And in terms of domestic politics-wise, PM Ishiba is losing popularity in Japan. And we are not going to speculate on politics just for the sake of it. But there is a potential possibility that PM Ishiba will have to step down or someone else will have to replace him if his popularity continues to plunge from here. So BOJ, I think, are looking at that very, very closely. And they just don't have the political capital to actually hike at this point now. But if we do have to see more certainty in that political front, and I think BOJ will resume its hiking path, albeit in very small steps. We've been talking about 25 basis points or 50 basis points from here until they reach terminal rate. And our best case is that if we do see that certainty in political situation in Japan, they will hike by year-end this year, once. If not, we'll probably delay until early next year. Yeah, when we talk about Ishiba's position at the moment, Masa-san, there's also been, of course, concerns and we've been hearing it from the opposition parties about addressing cost of living and concerns around inflation in the country as well. Yesterday, we saw that in the lower house that Ishiba-san spoke about potentially putting forward extra budget here in the autumn as well. And there was still that talk around a potential cut to the sales tax. How likely do you think this sort of policy will come through now with the Prime Minister in that minority position? And then what is then the impact in terms of the JGB market? Is a lot of that already been priced in as well? I think you raised a pretty interesting question. Japan has been through this many, many times. It's always when you lose popularity, I think it's elsewhere too. You kind of step on the fiscal accelerator and try to pump in and spend more money to gain your popularity. But for the case of Japan, it's like a merry-go-round. It has been around for a long time. And this time wise, I do not think that they will have a bit of extra space to spend. But then just because of the whole political situation, and also Japan's fiscal discipline is still a pretty much ingrained mindset in the current LDP leadership administration. So I think that even with fiscal spending, it will just be a bit more. And we do not foresee a big bang like what we see in the US, for instance, when they have the one big beautiful bill. In Japan, we might have a small, big, beautiful, small bill. And I think in terms of market price action wise, in terms of JGB, it has more or less priced in a bit, quite a lot for us, especially in the super long end, if you have seen the steepening of the curve year to date. And if we do have that small fiscal spending coming out, sure, JGB yield or curve will steepen a bit from here. But I think this is the entry point that investors should be really looking at if they really want to allocate some money to JGB, especially on the hedge basis, just because of the premium you're getting hedging back to the home currency, for instance, for US or European investors.

Ukrainian President Volodymyr Zelenskyy said Tuesday that he had a productive talk with President Trump focused on ending the war with Russia. CBS News national security contributor Samantha Vinograd has more.

Kyiv

Ukraine Invasion

Zelenskyy holds 'productive talks' with Trump about war

Family members of two of the victims from the 2023 implosion are demanding tougher regulations following the damning report released on Tuesday. Five people died when the submersible imploded off the coast of Newfoundland.

Washington

Deadly Titan submersible disaster was preventable, Coast Guard says

The House Oversight Committee has subpoenaed multiple people over the Jeffrey Epstein files, including former President Bill Clinton and former Secretary of State Hillary Clinton. CBS News' Jake Rosen has more details.

House committee subpoenas Clintons, others over Epstein files

U.S. Customs and Border Patrol agents have been directed through a federal court order to stop deportations under President Trump's asylum ban, sources say. CBS News' Camilo Montoya-Galvez has more details.

Court blocks deportations under Trump's asylum ban, sources say

A man suspected of murdering four family members in Tennessee has been captured after a four-day manhunt, authorities said. CBS News' Nicole Valdes has more.

Jackson

Suspect arrested in murders of 4 Tennessee family members

The ruling comes a month after Brazil’s top court ordered the former president to wear an ankle monitor, submit to a curfew and abide by limitations on his activity as legal proceedings investigating an alleged coup plot continue.

State of Rio de Janeiro

Brazil's Supreme Court orders house arrest of Bolsonaro

The US and Lebanon have been holding talks on a roadmap to fully disarm Hezbollah. Lebanon's new leadership has pledged to extend its authority across all its territory but has so far avoided acting against Hezbollah.

Beirut

Lebanon faces renewed pressure to disarm Hezbollah

CBC News had exclusive access to a Canadian Armed Forces plane that dropped about 10,000 kilograms of humanitarian aid into Gaza, the first time Canada joined the airdrop operations. Several countries airdropped food on Monday, but aid organizations agree they are more symbolic than effective.

Ottawa

Middle East Conflict

Canadian military makes aid drop into Gaza

The Prime Minister's Office said to the Chief of Staff, Lieutenant General Eyal Zamir that, "If this does not suit him, you should resign."

Jerusalem

Israel's Netanyahu says decision made for full occupation of Gaza

Delegates are gathering this week at the United Nations in Geneva, attempting to negotiate a global treaty to curb plastic pollution. But diplomats and climate advocates warn that efforts by the European Union and small island states to cap virgin plastic production are threatened by opposition.

Geneva

Strong UN treaty on plastic pollution in doubt as talks resume

President Trump announced Friday on social media that he ordered two nuclear submarines to move into more strategic positions near Russia. On Monday, Russian officials downplayed the comments and warned about the risk of nuclear rhetoric.

Moscow

Russia downplays Trump's announcement about nuclear submarines

U.S. trade representative Jamieson Greer told "Face the Nation" that tariff rates are "pretty much set" ahead of President Trump's Aug. 7 deadline. CBS News MoneyWatch correspondent Kelly O'Grady has the latest.

Global Tariffs

White House holds firm on tariff rates ahead on Aug. 7 deadline

Donald Trump confirmed his special envoy Steve Witkoff will visit Russia, ahead of a deadline the U.S. president has set for Russia to agree to end the Ukraine war or face new sanctions. Witkoff is expected in Moscow in the middle of this week.

U.S. envoy Steve Witkoff expected to visit Russia

New images of emaciated Israeli hostages held in Gaza have horrified Israelis and added pressure on Prime Minister Benjamin Netanyahu to reach a ceasefire with Hamas, even as his government considers another expansion of the nearly 22-month war.

Tel Aviv-Yafo

Videos of hostages increase pressure on Netanyahu for ceasefire

Pope Leo XIV wrapped up a weekend jubilee for more than 1 million young Catholics at a Rome suburb. As a new generation from around the globe celebrated, the pope drew attention to their peers in Ukraine and Gaza who cannot.

Rome

Pope Leo XIV addresses Gaza, Ukraine at youth festival

A shipwreck off Yemen has killed at least 68 people, the UN's migration agency said, with dozens still missing after the boat carrying mostly Ethiopians sank.

Sana'a

Migrant boat sinks off Yemen, killing at least 68

After two unverified videos of Israeli hostages were released, Hamas said the hunger crisis in the region puts them at risk. The militant group said it would deliver food from the Red Cross to the hostages under a couple of conditions, including permanent humanitarian corridors.

Hamas says hunger crisis putting hostages at risk

U.S. President Donald Trump fired the U.S. commissioner of labour statistics after weak jobs numbers signaled tariffs weren’t yet leading to his promised economic boom.

Trump dismisses weak jobs numbers, fires labour statistics chief

Government scientists warn that the 2025 wildfire season in North America is projected to be the longest ever, with fires already causing significant damage across the western United States and Canada. Major blazes have led to evacuations, destruction of historic sites, and widespread air quality alerts.

Santa Barbara

Wildfire season in North America shaping as worst on record

A volcano in Russia's Far East has erupted after sitting dormant for 600 years. Scientists believe the eruption was triggered by the massive earthquake that struck the region last week.

Kamchatka Peninsula

Russian volcano erupts for first time in 600 years

An independent watchdog agency responsible for enforcing a law against partisan political activity by federal employees has opened an investigation into Jack Smith, the special counsel who brought two criminal cases against Donald Trump before his election to the White House last year.

Former Trump prosecutor Jack Smith faces probe by U.S. watchdog

New outbreaks of violence overnight into Sunday (August 3) rocked Syria straining a fragile ceasefire. Meanwhile residents in Sweida are calling access to more humanitarian aid.

As Suwayda

Humanitarian needs escalate in Sweida as truce frays

Parts of the European Commission's much-anticipated AI Act come into force this weekend. It's been hailed as the first piece of comprehensive legislation aimed at regulating AI globally, though critics say it doesn't go far enough.

Brussels

Rise of AI

EU's landmark AI act enters new phase

A Ukrainian lawmaker and a pair of local officials, as well as an unspecified number of National Guard personnel, have been caught in a major graft scheme that involved using state funds to buy drones and other military hardware at deliberately inflated prices in return for bribes.

Ukraine uncovers major drone procurement graft scheme

Over the past few days, Hamas and its ally Islamic Jihad have released three videos showing two hostages seized during the October 7, 2023, attack on Israel that triggered the ongoing war in Gaza. The videos sparked reactions from Israelis who are stepping up calls for a truce.

Israeli hostage families protest in Tel Aviv

Pope Leo XIV celebrated the concluding mass of one of the most important events of the Holy Year. A million faithful filled the Tor Vergata esplanade in Rome. Pope Leo sent a message of hope for the young people afflicted by wars and recalled the words of his predecessor.

Pope Leo urges Catholic youth to spread faith and enthusiasm

President Trump explained why he fired Bureau of Labor Statistics Commissioner Erika McEntarfer on Friday. Government data showed fewer jobs were added to the U.S. economy last month than expected.

Trump announces new tariff rates, fires employment commissioner

Former Special Counsel Jack Smith, who ran two federal prosecutions of President Trump, is under investigation for allegedly violating a law barring federal employees from using their position to influence elections.

Jack Smith investigated for using position to influence elections

Montana authorities released a new surveillance image showing who they have identified as the suspect in a bar shooting in Anaconda. Meanwhile, nearly 2,000 miles away, police in Tennessee are searching for a quadruple homicide suspect.

Anaconda

Suspect on the run after Montana bar shooting

Los Angeles officials are praising an appeals court ruling limiting immigration stops, but the decision may only escalate a battle over transparency and control. Elise Preston has the latest information.

Breakdown