Bank of Japan Governor Kazuo Ueda, despite global instability, has indicated that a rate hike remains a possibility, potentially in June. While markets anticipated a hold for April, Ueda stressed the need to monitor geopolitical developments, particularly concerning Iran, and their economic impact on Japan.
Sources familiar with the BOJ's internal discussions suggest policymakers are deliberating until the last minute, influenced by ongoing US-Iran talks. Governor Ueda stated decisions would hinge on the likelihood of projections and associated risks, departing from previous patterns of signaling rate increases. This ambiguity led markets to scale back expectations for an April hike.
However, Ueda also highlighted factors supporting a hike, including robust corporate profits and government stimulus, arguing Japan's situation differs from that of U.S. and European central banks. Extremely low real interest rates and the risk of further yen depreciation are key concerns. Analysts suggest a hike is likely by June, with markets pricing in an 80% chance. Some see a slim possibility of an April increase if geopolitical de-escalation occurs.