Japan: Bank of Japan maintains rate in April
BOJ stands pat again: At its meeting on 28 April, the Bank of Japan (BOJ) decided by a six-to-three vote to keep its policy rate at 0.75%. The decision was in line with market expectations.
The Middle East conflict drives a cautious stance: The BOJ’s decision was influenced by the uncertainty over the U.S.-Iran war, with elevated oil prices pushing up inflation in March. The Bank struck a hawkish tone: Three board members voted for a hike, inflation forecasts were revised sharply higher, and Governor Kazuo Ueda said upside price risks currently outweigh downside growth risks. Still, the BOJ refrained from hiking for now as it awaits more clarity on the impact of the Middle East conflict on economic growth and prices.
Further tightening expected by end-2026: The BOJ affirmed that it will begin raising rates again ahead. All of our panelists expect further tightening by the end of 2026, with several now expecting more than one hike this year. Much will depend on the course of the U.S.-Iran war: a prolonged disruption in the Strait of Hormuz would likely lift inflation and lead the BOJ to tighten monetary policy further.
The BOJ will reconvene on 15–16 June.
Panelist insight: ING’s Min Joo Kang and Chris Turner commented:
“The 3-to-6 split is the largest divide among board members during Ueda’s governorship. We assume the split votes indicate that board discussions should focus on the timing of the rate hike, rather than the direction. […] Board members Takata (who dissented in March), Tamura, and Nakagawa dissented. While Takata and Tamura are known for their hawkish views, Nakagawa’s stance was quite unexpected, as she is considered among the doves. Her term ends June 29 after June 16 meeting, making a June rate hike more likely.”