The Bank of Japan held its benchmark interest rate at about 0.75 per cent on Tuesday, but flagged a sharp rise in inflation as the Iran war drives up energy prices in a country that imports more than 90 per cent of its crude from the Middle East. The decision came on a six-to-three vote — the biggest split under governor Kazuo Ueda since the BoJ scrapped negative rates in 2016 — with the three dissenters calling for an immediate hike to 1 per cent.
The committee lifted its forecast for "core" inflation (consumer prices excluding fresh food) to 2.8 per cent for the fiscal year ending March 2027, up from 1.9 per cent in January, citing higher crude prices feeding through to corporate margins and household real income. It also said growth would slow this fiscal year and that "risks to economic activity are skewed to the downside and risks to prices are skewed to the upside". Capital Economics expects another rate rise in June, barring a fresh escalation in the Middle East.
The yen strengthened against the dollar after the decision, but the Nikkei 225 — at an all-time high of 60,537 on Monday — fell about 1 per cent; the bank-heavy Topix rose 0.9 per cent. Finance minister Satsuki Katayama said the government was ready to act against sharp currency moves, with the yen near ¥159.50 to the dollar. The BoJ is the first of four major central banks deciding rates this week, with the Federal Reserve, the European Central Bank and the Bank of England all expected to hold. Source: Financial Times, 28 April 2026, Leo Lewis.