Bank of Japan keeps policy rate steady while raising inflation forecast on Iran war worries

The yen rose on Monday, helped by comments from Bank of Japan Governor Kazuo Ueda who left the door open to a near-term rate hike. Javier Ghersi | Moment | Japan's central bank kept its policy rate steady at 0.75% on Tuesday, while revising its inflation estimates upwards as the Iran war raises supply-side risks. The decision to keep rates steady came in a split 6-3 vote, and was in line with Reuters-polled analysts' estimates. The dissenting members proposed to raise the policy rate to 1%, arguing that tensions in the Middle East and overseas skewed price risks to the upside. The Bank of Japan also cut its growth forecast for the fiscal year 2026 to 0.5% from 1%, and sharply raised its core inflation outlook to 2.8% from 1.9%. The bank warned that Japan's economic growth was likely to decelerate as the increase in crude oil prices due to the the Middle East crisis is expected to crimp corporate profits and real household incomes "through factors such as a deterioration in the terms of trade." Japan had narrowly avoided a technical recession in the last quarter of 2025, with the country's economy growing at a revised 0.3% quarter on quarter and 1.3% year-on-year. Inflation in Japan accelerated for the first time in five months , rising to 1.8% in March as the Iran war fuels worries around energy prices. Headline inflation came in at 1.5%, compared with 1.3% in February, staying below the central bank's 2% target for a second straight month. …