The Bank of Japan is widely expected to keep the policy rate steady at 0.75% tomorrow.
The Bank of Japan is widely expected to keep the policy rate steady at 0.75% tomorrow. The central bank will also release the quarterly outlook report where inflation is expected to be revised higher, while growth lower due to the US-Iran war.
There were some speculations a couple of weeks ago that the BoJ could have hiked already in April, but the macro conditions were never really there. In fact, despite the third consecutive year of wage growth above 5%, inflation hasn’t shown any sign of re-acceleration. On the contrary, it’s been trending downwards since last year.
The strong decline in headline inflation in recent months has been attributed to government subsidies for electricity and gas but the Core-Core CPI, which excludes food and energy prices, has been slowing steadily as well. It’s still above the BoJ’s 2% target (currently at 2.4%), but not really screaming for urgent hikes. BoJ Governor Ueda recently said that the US-Iran war could increase inflation but also weigh on growth.