BOJ Poised to Hold Rate at 0.75% on April 28 as It Assesses Mideast Risks

The Bank of Japan is set to keep its benchmark interest rate at 0.75% at its monetary policy meeting on April 28. Some officials have voiced concern that a surge in crude oil prices could fuel inflation, but there is little support for a rate increase while the outlook for the war in the Middle East remains uncertain. The central bank is expected to put off any decision on an additional hike until its June meeting, as it has yet to clearly gauge the conflict’s impact on Japan’s economy and prices.

The BOJ has said it will raise rates and adjust the degree of monetary easing if the economy and inflation evolve in line with its forecasts. At its March meeting, some board members proposed a rate increase, but the motion was voted down by a majority. Some members may press for a hike again this time. In a press conference after the March meeting, Governor Kazuo Ueda said a rate increase would be possible if the impact of higher oil prices proves temporary.

Supply concerns are also spreading beyond crude oil to products such as naphtha, a feedstock used in petrochemicals, as the closure of the Strait of Hormuz drags on. A worsening supply crunch could lead to an economic slowdown. That has reinforced the view within the BOJ that it needs more time to assess conditions. Given downside risks to the economy, many inside the bank see holding policy steady as the appropriate course this time. Similar concerns have surfaced within the Japanese government, where officials say another increase soon after the last rate hike could quickly slow the economy.

The BOJ raised its benchmark rate to 0.75% from 0.5% in December and has since refrained from further increases at two straight meetings. Even so, another pause could heighten inflation pressure by weakening the yen against the dollar. The yen has recently traded in the 159 range per dollar, and some market watchers expect it to weaken beyond 160.

After this meeting, the BOJ will release updated forecasts for this year’s inflation and real gross domestic product growth. In January, it projected inflation would rise 1.9% from a year earlier in 2026, and that forecast appears set to be revised higher. Its real GDP growth forecast is also likely to be lowered from the 1.0% projected in January.

Kim Il-kyu, Tokyo correspondent, Hankyung.com, black0419@hankyung.com