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Japan’s central bank kept its key interest rate unchanged at 0.75% on April 28, pointing to growing risks from the war in Iran that could lift oil and other energy prices. In a decision released Tuesday, the Bank of Japan said it needed to focus closely on how developments in the Middle East would affect the future outlook.
The Bank of Japan said in its statement that there were “various risks to the outlook” and that “for the time being it is necessary to pay particular attention to the impact of the future course of the situation in the Middle East.” The decision came as disruptions related to the conflict intensified concerns about energy supplies and costs.
The central bank said the economy was still growing moderately, but it expected the growth rate to slow. The decision also reflected an effort by policymakers to balance that cooling outlook with the challenge of inflation dynamics in a period of shifting energy prices.
Within the Bank of Japan’s monetary policy board, the vote to keep the benchmark rate at 0.75% was 6-3, with members divided on how quickly to adjust policy after years of keeping the rate near or below zero to counter deflationary pressures.
Markets reacted to the outcome quickly. Japan’s benchmark Nikkei 225 share index dipped more than 1% after the decision.
The Bank of Japan’s warning about the Middle East threat came against a backdrop in which the Strait of Hormuz was effectively closed due to the war, according to the report. With fewer ships able to cross the strait—through which about 20% of traded oil and natural gas moves—energy prices for oil and gasoline have risen sharply, and jet fuel, cooking gas and other energy products have begun to look scarce in parts of the world.
Japan depends heavily on oil from the Middle East to run its economy. That linkage to global energy shipments has added pressure on policymakers as they consider how energy-driven price changes might flow through to household costs and business conditions.
The decision also landed during a broader week of central bank meetings abroad. The report said the U.S. Federal Reserve and central banks in Europe were also set to meet on interest rates this week.
In keeping the benchmark rate unchanged despite the board’s split, the Bank of Japan signaled that the immediate policy path depends on how quickly Iran-related energy disruptions develop and whether they translate into sustained inflation pressures. The statement, however, framed those risks as something to monitor closely “for the time being,” rather than as a reason to tighten policy right away.