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(Bloomberg) -- Bank of Japan Governor Kazuo Ueda kept investors guessing over the timing of his next interest rate hike with comments that cooled expectations of a near-term move and weakened the yen.

The BOJ kept the overnight call rate at 0.5% at the end of a two-day policy meeting in a widely expected unanimous vote, according to a statement Thursday. The central bank’s raising of its price forecasts and toning down of its concern over uncertainties earlier in the day fed into expectations that the BOJ may increase rates in coming months, a view that Ueda appeared to temper during his press briefing.

“Right now I don’t see us being behind the curve. Neither do I think there’s a high risk we’ll fall behind,” Ueda said in his post-decision presser. “We don’t see the fog suddenly lifting” over trade, despite progress made through the US-Japan deal.

Ueda’s comments came after the BOJ raised inflation projections for all three years in its outlook period, and softened language on uncertainty over trade. That increased market speculation over a nearer-term hike, but the governor’s messaging during his post-decision presser remained largely dovish, suggesting Ueda was trying to avoid being pinned down on timing of his next rate-hike.

The yen weakened after Ueda spoke, swinging from a gain of as much 0.6% versus the dollar earlier in the day to be down as much as 0.1% after he wrapped up his press conference. Japanese government bond futures swung from a small loss to a small gain.

Ueda said he would refrain from making direct comments on the currency. In terms of inflation, he said the underlying price trend was rising but was still below the BOJ’s 2% target.

“Ueda may have done a little too much, but he had to signal a sign of caution with uncertainty still high,” said Tetsuya Inoue, senior chief researcher at Nomura Research Institute, who expected the next rate hike to come as early as October. “Ueda may have sounded dovish for those who wanted a clear hint of a hike but his comments do point to the need for normalization.”

The nine-member board boosted its median inflation projection for the current fiscal year to 2.7% from 2.2% in its quarterly economic outlook report, reflecting persistent increases in food prices. It also revised up its forecasts for fiscal year 2026 and 2027, suggesting the central bank is getting closer to its stable inflation target.

Still, officials likely need more time to gauge how US tariffs will affect Japan’s economy and global commerce, and Ueda was careful to say he still wants to see more hard data.

What Bloomberg Economics Says...

“The Bank of Japan’s decision to stand pat Thursday was in line with our view that it’s taking a cautious stance as it assesses the impact of US tariffs on exports. It likely also wanted to avoid making political waves with an increase in borrowing costs at a time when the government has been weakened further by a setback in the upper house election.”

— Taro Kimura, economist

Click here to read the full report

The BOJ gathering concluded just hours after the Federal Reserve kept its benchmark interest rate steady with Chair Jerome Powell, citing “many, many uncertainties” impeding a move as Governors Christopher Waller and Michelle Bowman dissented by voting for a quarter-point cut. Powell tempered expectations for a rate cut in September.

Those issues are key for markets, with the yen hovering near its weakest since early April and within easy reach of the psychological level of 150 to the dollar. Meanwhile, bond yields have been pushing higher in recent months, with the moves in longer-maturity debt spilling over into global markets.

Japan’s government struck a trade deal with Washington on July 22 that will lower tariffs on US imports of Japanese autos and most other goods to 15%. Provided there’s no change to the levies, BOJ officials expect they will have enough data by at least year-end to be able to consider whether a rate hike would be appropriate, people familiar with the matter told Bloomberg earlier this month.

The BOJ’s upgrade to the inflation outlook came after persistently high prices were a key concern for voters during this month’s upper house election, which resulted in a historic setback for Prime Minister Shigeru Ishiba and his ruling coalition. The premier has so far vowed to stay in office even as some lawmakers within his Liberal Democratic Party have urged him to step down.

Any political instability would complicate Ueda’s job further as the bank would want to carefully communicate with the government after a history of clashes in past rate hike cycles. If the BOJ boosts rates once more, borrowing costs would rise to the highest level in three decades.

“If growth doesn’t miss forecasts by much, I expect the BOJ to conduct an additional rate hike by year-end,” said Harumi Taguchi, principal economist at S&P Global Market Intelligence. “The BOJ wants to assess how tariff impacts will affect Japanese corporate profits, as well as investment and wage hike trends, so I think they will make the move in December.”

--With assistance from Brett Miller, Paul Jackson, Yoshiaki Nohara and Erica Yokoyama.

(Updates with latest market moves and comments from Ueda.)