The Bank of Japan is expected to maintain the policy rate at 0.75% at its upcoming meeting on April 27–28, 2026. While inflationary pressures remain a concern for policymakers, they are prioritizing stability amid the significant geopolitical and economic uncertainty. Several reports suggest the central bank is leaning toward a “wait-and-see” approach, opting to gather more data rather than committing to a pre-emptive hike this month.
The primary driver for this caution is of course the US-Iran conflict, which has de-escalated significantly in the past couple of weeks but hasn’t been officially resolved yet. The volatility in the markets complicates the BoJ’s efforts to balance price growth with economic resilience. Although higher oil prices and a weakening yen are expected to increase inflation in the short-term, the central bank is wary of the potential for an economic slowdown.
Earlier in the month, there were expectations for a BoJ rate hike at the upcoming meeting because of higher energy prices, but the conditions were never really there. The central bank can’t hike into uncertainty and volatile markets as it would exacerbate the negative impact on the economy. Moreover, inflation in Japan has continued to gradually ease despite everything, with most metrics being near or below the 2% target.
The BoJ is expected to keep its tightening bias, while revising growth lower and inflation higher in its quarterly outlook report. The market is pricing in just a 7% chance of a hike at the upcoming meeting, but the probabilities increase to 57% for the June meeting. That will likely depend on the US-Iran negotiations and the Strait of Hormuz.
