Commerzbank’s Volkmar Baur reports that the Bank of Japan (BoJ) left rates unchanged with an 8–1 majority, as widely expected. The BoJ still signals willingness to hike if the economy evolves as forecast, and markets see about a 60% chance of an April move. However, uncertainty around Iran and energy prices clouds the outlook for the Japanese Yen.

BoJ caution tempers Yen prospects

"Bank of Japan left interest rates unchanged this morning. With a vote of 8 to 1, the decision also had a stronger majority than some analysts had anticipated, who had expected up to three dissenting votes. In addition to Hajime Takata, who voted to raise the policy rate to 1%, at least Naoki Tamura also stated that she sees the risk of higher inflation in the coming months."

"Looking ahead, the Bank of Japan is also sticking to its statement that it will continue to raise interest rates should the economy develop as expected."

"The market currently estimates a roughly 60% chance that the Bank of Japan will raise interest rates at its next meeting in late April."

"However, this will naturally depend heavily on the further development of the Iran conflict and, consequently, energy prices."

"Price trends at Japanese gas stations already suggest that inflation in March is likely to be about 0.3 percentage points higher solely due to rising gasoline prices."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)