Will There Be a “Signal” of a Rate Hike at the Bank of Japan’s April Meeting? Insights from the Tankan and Regional Branch Managers’ Reports: Nomura Securities’ Iwashita Mari (岩下真理)

Three main challenges have been identified ahead of the Bank of Japan’s April meeting. They are the rising inflation risk from higher crude oil prices and foreign exchange effects, the balance between prices and economic conditions amid differing views within the administration on the economy, and the outlook for the number of future rate hikes based on assumptions about the end of the hiking cycle. A sustained rise in crude oil prices could have a delayed impact on the economy, and the Bank of Japan’s actions could be influenced by the possibility of foreign exchange intervention.

A past example of the government’s right to request a postponement of a vote is the request it made when the zero-interest-rate policy was lifted in August 2000, which was rejected. Views remain that coordination with the government will be key to the rate-hike decision. Some analysts have also suggested that if the Takaichi administration’s understanding cannot be secured, the Bank of Japan may move to postpone a rate hike.

In the March Tankan survey, the response reference date was 12 March, meaning that the survey cannot be said to have fully incorporated developments concerning Iran. However, inflation expectations have been revised upward, and views factoring in inflation risks are gaining strength. If forecasts for the new core indicator are included in the Outlook for Economic Activity and Prices, the market is expected to find it easier to assess the likelihood of the Bank of Japan achieving its 2% price stability target.

The Regional Branch Managers’ Reports explicitly addressed wage trends, stating that many companies are expected to maintain wage-increase policies for fiscal 2026 at roughly the same level as in fiscal 2025. At the same time, the reports noted the possibility that companies could adopt a more cautious approach to wage-setting depending on developments in the Middle East. Some expressed concern about the impact on regional economies of higher costs resulting from surging crude oil prices and disruptions to logistics, while other reports warned that developments going forward could pose a downside risk to the economy.

Views are spreading in markets at the start of the new fiscal year that interest rates will continue to rise, and speculation is developing over the possibility of a rate hike at the April meeting and the resulting market reaction. Attention is also focused on the impact of committee-member turnover during the April-June quarter and the staffing situation resulting from the illness of a deputy governor, as well as progress in reforming communication with markets, including “notifications” of rate hikes.