The escalation of the situation in Iran has not led the Bank of Japan (BOJ) to suspend its interest rate hike plans. According to informed sources, BOJ officials are still pushing for interest rate normalization, and the possibility of a rate hike in April has not been ruled out.
According to Bloomberg, citing informed sources, although BOJ officials believe the likelihood of a rate hike at the policy meeting ending on March 19 is extremely low, they have not changed their existing stance—as long as the economic outlook evolves as expected, they will continue to push for rate hikes. Officials stated that policy decisions will be made on a case-by-case basis at each meeting, and an April rate hike is not impossible.
The tensions in the Middle East have introduced new uncertainties to this outlook. BOJ officials are currently focusing on assessing how the conflict surrounding Iran will affect domestic and international economic conditions and financial markets.
Before the U.S. and Israel launched attacks on Iran, Japan's economic and inflation data were generally in line with the BOJ's forecast trajectory, informed sources said. The evolution of the current situation will largely determine the pace of the BOJ's next steps.
<h2>No action in March, April window not closed</h2>
According to informed sources, BOJ officials are still pushing for interest rate normalization, and the possibility of a rate hike in April has not been ruled out. Officials generally assess the likelihood of a rate hike at the March meeting as low, but this does not mean a shift in the rate hike path.
Officials emphasized that their overall stance—that they will continue to raise rates if the economic situation develops as expected—has not changed, and the policy direction will continue to follow the principle of &#34;evaluating each meeting individually.&#34;
This statement implies that the April meeting remains a potential window for a rate hike. The key factors affecting the timeline are the duration of the conflict in Iran and its spillover effects, which officials view as core variables for assessing Japan's economic outlook and interest rate direction.
<h2>Oil price risks: Inflation expectations may be pushed higher</h2>
BOJ officials are highly vigilant about the risks of rising oil prices leading to upward inflation, especially against the backdrop of Japanese companies' increasing willingness to pass costs onto consumers.
According to informed sources, if the ongoing tensions in the Middle East lead to sustained high oil prices, it may elevate inflation expectations, thereby strengthening the momentum for price increases.
This judgment has dual implications for the BOJ: on one hand, persistent cost-push inflation may provide justification for further rate hikes; on the other hand, if the situation deteriorates beyond expectations and impacts economic growth, it may create constraints. Officials' current stance is to continue observing rather than tightening or loosening expectations prematurely.
<h2>Before the Iran conflict, Japan's economy was generally in line with expectations</h2>
According to informed sources, before the U.S. and Israel launched attacks on Iran, Japan's economic and inflation trends were generally in line with the BOJ's previous forecasts.
This background indicates that external shocks are the main disruptive factors in the current assessment, rather than endogenous changes in Japan's domestic fundamentals.
The core challenge currently facing the BOJ is how to balance the existing rate hike path with external uncertainties—if they pause rate hikes too early due to geopolitical factors, it may lead to market misinterpretation of their policy intentions; if they act rashly without considering spillover risks, they may face accusations of policy missteps. Officials' current choice to maintain an open stance and make data-driven decisions is a direct reflection of this dilemma

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Informed sources reveal that officials from the Bank of Japan will continue to promote interest rate normalization. The assessment of the likelihood of a rate hike at the March meeting is generally low, but this does not mean a shift in the rate hike path. As long as the economic outlook evolves as expected, they will continue to push for rate increases. Officials stated that policy decisions will be made individually at each meeting, and a rate hike in April is not impossible

- The Bank of Japan (BOJ) is continuing its plans to normalize interest rates, with the possibility of a rate hike in April not ruled out despite escalating tensions in Iran.  
- While officials assess that the chance of an interest rate increase in the March meeting is low, their stance remains unchanged, planning to evaluate each decision based on economic conditions.  
- The ongoing conflict is a significant factor affecting Japan's economic outlook and rate trajectory, particularly concerning rising oil prices and inflation risks that could impact future monetary policy.

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Report: The Bank of Japan may keep the March interest rate unchanged, with the option of a rate hike in April still under consideration