The Bank of Japan Sends Subtle Signal, Avoids Committing to Rate Hike Ahead of April Meeting

On April 6, the Bank of Japan (BOJ) sent subtle signals in its two quarterly regional economic reports, avoiding stoking market expectations of a rate hike this month. Separately, in a news release summarizing branch managers’ views, the BOJ noted that amid rising uncertainty, concerns are growing over price increases—especially energy hikes—and their drag on corporate profits and private consumption. This suggests the BOJ is reluctant to commit to a rate hike with its next policy decision (April 28) just weeks away. Overnight indexed swap (OIS) pricing as of Monday showed traders see a roughly 66% chance of a hike this month, with the Iran conflict threatening to amplify inflation risks in Japan, where inflation is already elevated. The BOJ also noted that many reports show businesses are still passing on cost hikes (including labor and logistics costs) to selling prices. At the same time, firms are addressing consumer “inflation fatigue” by capping price increase sizes and expanding their low-priced product lineups. (FOREX)