Interesting divergence in the market right now on what the Bank of Japan might do this month. Most traders are getting cautious about an April rate hike due to Middle East tensions, but Sumitomo Mitsui Banking just put out their take that the BOJ could still move to 1% this month.

The logic here is actually pretty solid if you think about it. They're saying 1% would still be below what the Bank of Japan considers neutral—that sweet spot where policy isn't pushing the economy in either direction. And here's the thing: if they keep waiting and inflation starts trending down, it becomes way harder to justify raising rates later. You look at food price growth already slowing, and Japan's inflation trajectory is clearly heading lower.

So the real question is whether geopolitical noise will actually change the BOJ's hand, or if they stick to their inflation-fighting schedule. One major bank clearly thinks the latter is more likely. The market's pricing in hesitation, but we might be underestimating how committed the Bank of Japan is to normalizing policy while they still have the inflation cover to do it.

Keeping an eye on how this plays out—could be a meaningful policy divergence moment.