BoJ preview: no change expected amid the US-Iran uncertainty

The Bank of Japan is widely expected to hold its policy rate at 0.75% and adopt a wait-and-see stance at tomorrow’s meeting, while publishing a quarterly outlook that likely raises inflation forecasts and lowers growth due to US-Iran tensions. With core-core CPI at about 2.4% and wage growth above 5% this is not viewed as sufficient to force an immediate hike, so the BoJ is likely to retain a tightening bias without committing to dates. Markets are pricing a ~50% chance of a June hike and about 45 bps of tightening in 2026. A clear signal of a June hike would likely trigger a short-term rally in the yen; a neutral outcome would probably keep downward pressure on the currency and limit upside for Japan-focused assets.