According to insiders, officials from the Bank of Japan now believe that the decision on whether to raise interest rates at next week's policy meeting will become complicated due to weak consumer spending.

Sources say that some officials believe that if they choose not to raise interest rates in July, they will have more time to study the upcoming data to confirm whether consumer spending will rebound as expected. Some of them believe that the Bank of Japan should avoid giving the impression of being too hawkish.

Meanwhile, given that the inflation rate is generally in line with expectations, other officials are more willing to raise interest rates at the July meeting. They believe that the policy interest rate range of 0% to 0.1% is very low, and given the high uncertainty in the future, they may miss the opportunity to raise interest rates.

Insiders added that at the meeting ending on July 31st, officials from the Bank of Japan may not make a final decision until the last minute after reviewing the latest market and economic data. Affected by this news, the intraday increase of the Japanese yen almost halved.

In addition, the Bank of Japan will announce its plan to reduce bond purchases in the decision. Industry insiders say that market participants have gained a better understanding of the Bank of Japan's stance on reducing bond purchases, which has pleased some officials.

According to insiders, central bank officials have realized that many participants in the market expect the monthly purchase scale to shrink to 3 trillion yen in the next two years. Officials also expect that if bond yields rise significantly, the central bank will intervene, regardless of whether this commitment is written in the statement.

Currently, most observers expect the Bank of Japan to maintain interest rates unchanged at this meeting, as raising borrowing costs while reducing bond purchases would be seen as too aggressive a measure. One third of analysts expect the Bank of Japan to raise interest rates at its July meeting due to the continued weakness of the yen.

A survey last month showed that economists generally believe that if the central bank continues to do nothing on interest rate issues, it will lead to another depreciation of the yen. So far this year, the Japanese yen has depreciated by over 10% against the US dollar.

According to the latest data from the US Commodity Futures Trading Commission (CFTC), leveraged funds reduced their net short position in Japanese yen by 38025 positions in the week ending July 16, marking the largest decline since March 2011. However, after the reduction, there are still 76588 short-term contracts.