I just came across an interesting development. The Bank of Japan’s expectations for a yen rate hike have reversed directly over the past two days. The market’s probability of a rate hike in April has plummeted from 50% at the start of the week to now below 20%. The logic behind this shift is actually quite worth thinking about.

The main reason is the knock-on effects caused by the deterioration of the Middle East situation. The surge in crude oil prices has directly hit Japan’s import costs. Bank of Japan Governor Ueda Kazuo pointed this out earlier, and it will create downward pressure on the Japanese economy. It seems that the market and the central bank have reached a consensus—this is not a good time to raise rates.

When will the yen rate hike come? According to the latest survey, economists’ expectations are already basically split between April and June, at 38% and 35% respectively. Many institutional analysts believe June is a more realistic choice, because by then it will be possible to judge more clearly the real impact of this energy shock on the economy. Junki Iwahashi, an economist at Sumitomo Mitsui Trust, also said plainly that the likelihood of a rate hike in April is low.

This is not good news for the yen. The central bank keeping interest rates unchanged means pressure for the yen to weaken will continue. In addition, U.S. interest rates are still at a high level, so carry trades remain profitable—meaning the USD/JPY pair is likely to keep pushing higher. It is already approaching the 160 level, and some analysts even predict it could surge toward 165.

What’s interesting is that the Japanese government is clearly preparing for possible intervention. After recently communicating with U.S. Treasury Secretary Bessent, Finance Minister Koyuki Katayama said that it has already prepared to take bold action to support the yen. But honestly, if the Bank of Japan continues to raise rates slowly like this, it will be difficult for government intervention alone to fundamentally change the situation of a strong U.S. dollar. The real turning point still depends on the specific schedule for a yen rate hike—that is the key to determining the direction of the exchange rate.

Tomorrow (April 28), the central bank will release its latest decision, and this result could directly affect the yen’s subsequent performance. It’s worth keeping a close watch.