BoJ Holds Rates, Slows Bond-Buying Tapering from April 2026

Policymakers at the Bank of Japan stayed cautious about the uncertain Middle East situation at their April meeting, though several members still saw scope for near-term interest rate hikes. One official said there was “no need to take hasty action,” but argued the central bank should raise rates soon unless there are clear signs of an economic slowdown. Another member said “it is quite possible” the board could hike rates from the next meeting onward, even if uncertainty surrounding the Gulf conflict persists, while a third warned the central bank may need to accelerate tightening “without hesitation” if upside inflation risks intensify. Some members stressed that while downside risks to growth and upside risks to prices could both rise, policy should focus on preventing inflation from overshooting and hurting the economy later on. At the April 27–28 meeting, the BoJ kept its policy rate unchanged at 0.75% but raised inflation forecasts due to soaring oil prices linked to the Iran war.

Many Bank of Japan board members saw a need for further rate hikes should the Iran war-driven energy shock persist and fuel broader inflation pressures, minutes from the March meeting showed. While policymakers agreed temporary supply disruptions from Middle East tensions could be overlooked, they cautioned that a prolonged rise in energy costs risked second-round effects on expectations and underlying prices. One member urged raising rates “without long intervals,” while another pressed for tightening “without hesitation” if the economy avoided major damage. The BoJ left its short-term policy rate unchanged at 0.75% at the March 18–19 meeting, the first after U.S.–Israeli strikes on Iran. At its April gathering, the central bank again held steady, though a more hawkish divide underscored growing concern over mounting inflationary pressures from higher fuel costs and lingering price gains.

The Bank of Japan kept its short-term policy rate unchanged at 0.75% at its April 2026 meeting, leaving borrowing costs at their highest level since September 1995. The widely expected decision passed by a 6–3 vote, amid uncertainty over the Iran conflict and surging energy prices. Board members Hajime Takata, Naoki Tamura, and Junko Nakagawa dissented, calling for a hike to 1.0%. In its quarterly outlook, the central bank raised its FY2026 core inflation outlook to 2.8% from 1.9%, citing higher crude oil prices that likely push up energy and goods costs. At the same time, policymakers trimmed the FY2026 growth forecast to 0.5% from 1.0%, reflecting softer domestic momentum. Still, the overall economy is expected to expand moderately, underpinned by government support measures, accommodative financial conditions, and resilient corporate profits. The FY2025 GDP projection was slightly lifted to 1.0% from 0.9%, backed by last year’s trade deal with Washington.