Source: Flickr/ECB

- Board seen on hold at 0.75% in April
- Analysts push hike calls to June
- Ueda warns of inflation–growth trade-off
- Policy tensions build for PM Takiaichi

By Harry Daniels
LiveSquawk News
@HarryDaniels71

27 April 2026 | 11:30 GMT

The Bank of Japan will be the first of several major central banks to announce policy this week. Despite signalling a desire for higher rates, the ongoing uncertainty stemming from the Gulf crisis is likely to keep the Tokyo-based lender of last resort sidelined for now.

On Tuesday, the central bank’s Policy Board is widely expected to hold its main rate steady at 0.75% when it concludes its two-day meeting on 28 April.

Despite its recent inclination towards tightening, comments from Governor Kazuo Ueda suggest the bank is in a holding pattern. Speaking to reporters in Washington last week, he described the energy shock as a double-edged sword. “The current situation involves a significant shock from rising energy prices. This creates both upside risks to prices and, at the same time, downside risks to the economy. That is why policy responses are very difficult. It is not easy to give a general answer.”

Rate markets have pared back expectations for a hike, with implied probabilities falling below 10% ahead of the decision.

National CPI data released last week showed that headline inflation rose to 1.5% y/y in March, up from 1.3% previously. Core CPI, which excludes fresh food, increased to 1.8%, marking a five-month high. However, the “super core” measure, which strips out both food and energy, slipped a tenth to 2.5%.

Analysts at BofA Global Research last week revised their policy outlook, now expecting an April hold after previously forecasting a 25 bps increase.

“We had previously expected the BoJ to raise the policy rate to 1.0%. But in light of recent developments, including heightened uncertainty surrounding the Middle East, we now expect a hold in April and tentatively push back our forecast for the next hike to June,” said Takayasu Kudo of the US bank. “However, should disruptions related to the Middle East become protracted, or should fiscal policy debates lead to renewed instability in rates markets, that would raise the risk of a further delay to the July meeting.”

Growth risks remain a concern for Japan and its recently elected government, led by Prime Minister Sanae Takaichi.

As an industrialised economy, Japan is a major oil importer and heavily reliant on Middle East supply. The closure of the Strait of Hormuz has proven particularly problematic.

To mitigate rising costs and supply shortages, the government has authorised the release of more than 50 days’ worth of crude from strategic reserves by the end of April, with a further 20 days scheduled for May. Japan holds the world’s third-largest oil reserves.

In March, Finance Minister Satsuki Katayama also approved fuel subsidies, alongside a cap on pump prices at an average of JPY 170 per litre nationwide, warning that without intervention, prices could approach JPY 200.

JPMorgan’s Ayako Fujita argued that even if rates are left unchanged, the decision will likely be accompanied by a hawkish signal. “Even if it refrains from hiking, the BoJ will likely reaffirm its intention to continue raising rates and preserve room to hike at the next meeting in June.”

With Tuesday’s decision largely priced in, attention is already shifting to June. Fujita cautioned that tensions between fiscal and monetary policy could re-emerge. “The government, seeking to cushion the domestic impact of higher oil prices, is likely to move toward compiling a supplementary budget in the coming months. A scenario in which the administration does not welcome a BoJ rate hike while fiscal policy is being steered toward supporting growth cannot be ruled out. At the same time, if such circumstances intensify market concerns about ‘policy delay’, yields could rise further, and the yen could weaken.”