Summary
- The Bank of Japan is increasingly likely to hold rates at this month’s policy meeting as geopolitical risks in the Middle East intensify.
- Rising oil prices and a sharp jump in Japan’s 10-year government bond yield have made the policy outlook harder to judge, with the benchmark yield reaching its highest level since 1997.
- The probability of a rate hike implied by the overnight swap market has fallen to about 44%% from roughly 60%% last week, and the upcoming policy meeting was described as a close call.
Forecast Trend Report by Period
The Bank of Japan is increasingly likely to leave interest rates unchanged at this month’s policy meeting as geopolitical risks in the Middle East intensify.
Former BOJ board member Kazuo Momma told Bloomberg on April 12 that central banks typically take a wait-and-see approach in periods of uncertainty like the current one, bolstering the case for a rate hold.
The policy outlook has become harder to judge after US-Iran talks broke down, lifting global oil prices and pushing Japanese government bond yields sharply higher, he said. Japan’s 10-year government bond yield has climbed to its highest level since 1997.
Market expectations have also shifted. The probability of a rate increase implied by the overnight index swap market has fallen to about 44% from roughly 60% last week.
The BOJ will hold its monetary policy meeting on April 27-28 and has yet to provide a clear signal on its rate path. Momma called the meeting a close call.
Suehyeon Lee
shlee@bloomingbit.ioI'm reporter Suehyeon Lee, your Web3 Moderator.
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