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BOJ Rate Hike Delayed: Iran War Fuels Inflation Fears
22 Apr
Summary
- Most economists expect the Bank of Japan to hold rates steady on April 28.
- Rising oil prices due to the Iran conflict are impacting Japan's import costs.
- Expectations for the next rate hike have shifted to June, with some predicting later.
The Bank of Japan is widely expected to keep its policy rate unchanged at 0.75% when it concludes its meeting on April 28, according to a Bloomberg News survey of 51 economists. This anticipated decision comes as global tensions, particularly the US-Israeli conflict in Iran, have driven up oil and gas prices. These higher costs raise concerns for Japan, which heavily relies on imported natural resources, potentially hindering inflation control.
Consequently, the focus has shifted to a potential rate hike in June, with 57% of economists now predicting this move. Governor Kazuo Ueda acknowledged the difficulty of the April decision, balancing inflation risks. The weakening yen, trading near 160 per dollar, may prompt hawkish commentary from the BOJ to support the currency.
Analysts are revising their year-end policy rate forecasts upward, with the median estimate now at 1.25%, up from 1%. If the BOJ holds rates steady in April, the yen could further weaken, potentially reaching 163 per dollar. The central bank's quarterly economic outlook is also due, with inflation forecasts for fiscal year 2026 expected to be revised higher.
