The BOJ is expected to hold rates at 0.75% as the Iran war clouds its tightening path, with Governor Ueda’s press conference the key watch for signals on the next hike.
Earlier:
Summary
- The BOJ is widely expected to keep its policy rate at 0.75% at the conclusion of its two-day April meeting, with the decision due between 0230 and 0330 GMT.
- Officials see little need to rush a hike while the economic outlook remains highly fluid due to the Middle East situation, though they remain committed to raising borrowing costs in time, according to Bloomberg sources
- Hawkish board member Hajime Takata is expected to again propose raising the rate to 1.0%, though the board is likely to reject the move as it has done at the past two meetings.
- WTI crude is hovering around $100 per barrel, raising inflation concerns as the oil shock from the U.S.-Iran-Israel conflict deepens.
- The BOJ is set to cut its fiscal 2026 growth forecast and sharply revise up its inflation outlook in its quarterly report, with rising oil-related costs already prompting some firms to consider price hikes.
- Governor Ueda holds a press conference at 0630 GMT, with analysts saying he must signal readiness to continue hiking to prevent further yen weakness.
The Bank of Japan is widely expected to keep its benchmark interest rate on hold at 0.75% when it concludes its two-day April meeting on Tuesday, as the ongoing U.S.-Israeli war with Iran clouds the economic outlook and complicates one of the most delicate tightening cycles in the central bank’s recent history.
Officials have signalled in the days prior to the decision that they see little need to rush a rate increase while the situation in the Middle East remains highly fluid, even as their broader commitment to further tightening stays intact. The decision is expected between 0230 and 0330 GMT, with Governor Kazuo Ueda due to hold a press conference at 0630 GMT. of the Strait of Hormuz has driven crude prices sharply higher. WTI is hovering around $100 per barrel, a level feeding through to corporate cost structures and keeping consumer price inflation above the BOJ’s 2% target for a fourth consecutive year.
That persistent inflation has put the BOJ in an awkward position. While the war-driven oil shock would ordinarily justify a pause in rate hikes, the risk of allowing firms to entrench higher prices into wages and output costs has grown. A stubbornly weak yen, currently near the 160-per-dollar level that has previously triggered currency intervention, is adding to imported inflation and piling pressure on Ueda to signal a firmer tightening bias at his press conference.
Hawkish board member Hajime Takata is expected to again propose raising the policy rate to 1.0%, a move that would align with projections markets held earlier in the year. The proposal is likely to be voted down, as it was at the two preceding meetings, reflecting the board’s preference for caution given the external environment.
The quarterly outlook report due alongside the rate decision is expected to show the BOJ cutting its fiscal 2026 growth forecast as surging fuel costs weigh on corporate profits and consumer spending. At the same time, the inflation outlook is set to be revised sharply higher, reflecting rising oil-related input costs and growing evidence that firms are passing those costs on to customers.
UBS economists revised away from an April hike call earlier this month, citing a significant fading in market expectations, though the broader consensus has not abandoned the tightening narrative. Nearly two-thirds of economists in a Reuters poll still expect the benchmark rate to reach 1.0% by the end of June.
With the rate decision itself largely a foregone conclusion, the market focus falls squarely on Ueda’s tone. A clear signal that the BOJ stands ready to resume hiking once the fog of the Iran conflict lifts could offer the yen meaningful support and reassure investors that Tokyo has not quietly shelved its path toward policy normalisation.
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Bearish for the yen near term, with an expected BOJ hold reinforcing the wide rate differential with the U.S. Fed and keeping the currency close to the 160-per-dollar intervention threshold. Bullish for Japanese import-cost inflation, as the Hormuz disruption sustains elevated crude prices and adds to pipeline price pressure. Hawkish guidance from Ueda at his post-decision press conference could offer the yen modest support.
The quarterly outlook report is a key watch: a simultaneous downward revision to growth and upward revision to inflation would deepen the BOJ’s dilemma and could unsettle JGB markets. UBS has already revised away from an April hike call, citing significantly faded market expectations. Nearly two-thirds of Reuters-polled economists still see a move to 1.0% by end-June
This article was written by Eamonn Sheridan at investinglive.com.
