Following the US-Israel attacks on Iran, the likelihood of Japan raising interest rates has become extremely low.

Bank of Japan Deputy Governor Ryozo Himino offered no clear signal of a near-term interest rate hike in his latest remarks on Monday. This move, fueled by the conflict erupting in the Middle East over the weekend, further reinforced existing market expectations that BOJ policymakers would hold rates steady at this month's monetary policy meeting. "I want to closely monitor developments in the Middle East," Himino emphasized in a speech to business leaders in Wakayama Prefecture, western Japan. The global economic outlook has become even more uncertain following the US-Israeli attacks on Iran. Himino's statement suggests that the likelihood of a rate hike at the BOJ's March 19 policy meeting is extremely low. This contrasts sharply with his stance in January 2025, when he explicitly indicated that the committee would discuss raising the benchmark interest rate at a subsequent meeting, which the BOJ did indeed do. Himino's current silence aligns closely with market participants' expectations. Pricing in the overnight index swap (OIS) market indicates only a 6% probability that the Bank of Japan will raise its policy rate from 0.75% this month. However, market expectations for April are quite different, with pricing reflecting a probability of a rate hike at the April meeting as high as approximately 65%.