While the agency slightly raised its 2025 demand growth forecast to 740,000 bpd, this remains well below OPEC’s estimate of 1.29 million bpd, with the IEA emphasizing the structural impact of renewable energy adoption. The supply surge, alongside sanctions risks on Russia and Iran, has already weighed on oil markets, with Brent crude slipping below $67 a barrel despite being higher than April’s $58 low.

The IEA sees inventories building at an “untenable” 2.5 million bpd in the second half of 2025 and an implied surplus of 3.3 million bpd in 2026, while OPEC’s own calculations point instead to a potential deficit of 700,000 bpd if output stays steady.

This divergence underscores a widening split between the two organizations’ outlooks, even as Saudi Arabia pushes OPEC+ to lift output and China’s stockpiling helps keep near-term prices supported through market backwardation.

While the central bank kept its policy rate at 0.5% as expected, two board members dissented in favour of a hike to 0.75%, a rare sign of growing internal pressure to tighten policy as core inflation, at 2.7% in August, has remained above the BoJ’s 2% target for three consecutive years.

The decision to unwind ETF holdings — about ¥330 billion in book value annually, or roughly ¥620 billion at market value — is the first step in reducing a position that at one point amounted to 7% of the total Japanese stock market, though at this pace the process could take decades.

Markets reacted swiftly: the Nikkei 225 swung from record highs in the morning to close down 0.6%, the yen strengthened against the dollar, and government bond yields rose as traders priced in a higher probability of a 0.25% rate hike by October or early 2025.

The announcement came against a backdrop of political uncertainty, with the ruling Liberal Democratic Party heading into a leadership contest after losing its parliamentary majority, while rising living costs and weak wage growth remain central issues shaping both policy and sentiment.