Japan Expected to Hold Policy Rate Steady; Economic Outlook Likely to Be Lowered This Year

by Cha Minyoung

Published 27 Apr.2026 15:52(KST)

Expected to Hold Steady at 0.75%
BOJ Would Mark Third Consecutive Rate Hold
"Authorities Maintain a Hawkish Policy Stance"

The Bank of Japan (BOJ) is expected to maintain its policy interest rate at the current level during the two-day Monetary Policy Meeting held on April 27-28. Due to the shock from rising oil prices, driven by the situation in the Middle East, Japan's projected annual gross domestic product (GDP) growth rate for this year is also expected to be revised downward.

Kazuo Ueda, Governor of the Bank of Japan (BOJ), is holding a press conference in Tokyo, Japan, on the 19th of last month after concluding the March Monetary Policy Meeting. Photo by Reuters Yonhap News

According to Bloomberg News on April 26 (local time), the market is currently pricing in about a 7% chance of a BOJ rate hike at this meeting. Just a few weeks ago, market expectations were for an additional rate increase by the BOJ. However, those expectations have faded as the war in the Middle East has caused oil prices to surge. If the BOJ keeps rates unchanged, it will mark the third consecutive decision to hold rates steady.

The Financial Times (FT) of the UK pointed out that this outcome reflects the uncertainty stemming from the war between the United States and Iran, which has lasted more than six weeks, coupled with the vulnerability of the Japanese economy due to its high dependence on energy and raw material imports. In March, inflation in Japan accelerated for the first time in five months. The services producer price index also rose by 1.25% from the previous month, marking the largest increase in about 36 years. In contrast, consumer sentiment deteriorated by the most since the COVID-19 pandemic.

Kazuo Ueda, Governor of the BOJ, has not indicated any intention to raise rates this month in his recent public appearances. On April 16, while attending the G20 Finance Ministers and Central Bank Governors' Meeting in the United States, Governor Ueda only mentioned the presence of "two-way risks" when speaking with reporters and did not suggest any specific policy direction. Japanese financial authorities have also expressed their intention to avoid making policy decisions that the market does not anticipate.

It is expected that, at this meeting, the Policy Board will lower its forecast for Japan’s economic growth rate this year from the previous 1% to 0.8%. This comes just three months after raising the forecast from 0.7% to 1.0% in January. Kuriara Ko, an economist at global investment bank UBS Group, predicted that when the BOJ announces its rate decision, it is likely to significantly raise its inflation outlook while lowering its economic growth forecast.

However, Bloomberg News reported that authorities remain committed to a policy of gradual rate hikes over the medium to long term. There is also speculation that differences of opinion could widen among the BOJ's nine policy board members at this meeting. In the March meeting, the decision to hold rates steady was reached by a vote of 8 to 1.

The volatility caused by the war has been identified as a factor making it difficult for policymakers to decide on raising rates. Matsuzawa Naka, chief strategist at Nomura Securities, stated, "There are limits to how hawkish the BOJ can be," and added, "It is uncertain whether they will be able to control the yen's weakness and rising bond yields before the June meeting."

Japan Expected to Hold Policy Rate Steady; Economic Outlook Likely to Be Lowered This Year

Expected to Hold Steady at 0.75% BOJ Would Mark Third Consecutive Rate Hold "Authorities Maintain a Hawkish Policy Stance"

Expected to Hold Steady at 0.75%
BOJ Would Mark Third Consecutive Rate Hold
"Authorities Maintain a Hawkish Policy Stance"