Market bets that Japan's April rate hike probability is 69%, but the Bank of Japan signals a "cooling" stance

In its latest quarterly regional economic report, the Bank of Japan released highly nuanced policy signals, deliberately avoiding fueling market expectations of a rate hike before the next meeting on April 28.

Against the backdrop of increasing uncertainty in the future, the Bank of Japan has noted that, as prices rise—especially due to energy price increases caused by Middle Eastern military conflicts—there could be negative impacts on corporate profits and private consumption.

Based on this consideration, the Bank of Japan is reluctant to make any rate hike commitments just three weeks before the April 28 decision.

Although the Bank of Japan maintained its assessment of regional economies, it emphasized risks stemming from the Iran conflict and rising energy prices. Market reactions suggest that the current market estimates the probability of a rate hike this month at about 69%.

Meanwhile, the Bank of Japan also pointed out in the report that multiple feedbacks indicate companies are still passing on rising costs such as labor and logistics expenses to sales prices.

Notably, companies are also taking countermeasures, such as controlling the extent of price increases and expanding low-priced product categories, to ease consumer fatigue from rising inflation.

Overall, the Bank of Japan has chosen to remain ambiguous at this juncture, neither closing the door to a rate hike nor confirming any action in advance, aiming to retain policy flexibility while closely monitoring energy prices and domestic demand resilience.

#Bank of Japan