The likelihood of a Japanese interest rate hike has become extremely slim following the US-Israel attack on Iran

Odaily News According to the latest remarks made by Bank of Japan Deputy Governor Ryozo Himino on Monday, no clear signals were given regarding a near-term interest rate hike. Influenced by the conflict that erupted in the Middle East over the past weekend, this further reinforced the existing expectations in financial markets—that Bank of Japan policymakers will choose to maintain the status quo at this month's monetary policy meeting.

"I want to closely monitor the developments in the Middle East situation," Ryozo Himino emphasized during a speech to local business leaders in Wakayama Prefecture, western Japan.

Following the US-Israel attack on Iran, the global economic outlook has become increasingly uncertain. Himino's remarks this time suggest that the possibility of an interest rate hike at the Bank of Japan's policy meeting on March 19th has become extremely slim. This stands in stark contrast to his stance in January 2025—when he explicitly hinted that the committee would discuss raising the benchmark rate at subsequent meetings, after which the Bank of Japan indeed raised borrowing costs as scheduled.

Himino's choice to "remain silent" this time aligns closely with market participants' expectations. Pricing in the Overnight Index Swap (OIS) market indicates that the probability of the Bank of Japan raising the policy rate from 0.75% this month is only 6%. However, market expectations for April are entirely different, with pricing reflecting a probability of about 65% for a rate hike at the April meeting.