After Israel and the US launched an attack on Iran, the likelihood of Japan raising interest rates has become almost negligible.

Odaily Planet Daily reports that Bank of Japan Deputy Governor Ryozo Himino did not send any clear signals about a potential interest rate hike in the near future during his latest speech on Monday. Influenced by the outbreak of conflict in the Middle East over the weekend, this further reinforces the existing market expectations that the Bank of Japan policymakers will hold steady at this month’s monetary policy meeting.

“I want to closely monitor the development of the Middle East situation,” Himino emphasized during a speech to local business leaders in Wakayama Prefecture, western Japan.

Following the U.S.-led attack on Iran, the global economic outlook has become even more uncertain. Himino’s comments suggest that the likelihood of a rate hike at the Bank of Japan’s policy meeting on March 19 is now very slim. This stance contrasts sharply with his position in January 2025, when he explicitly indicated that the committee would discuss raising the benchmark interest rate at upcoming meetings, and the BOJ indeed increased borrowing costs as scheduled.

Himino’s choice to remain silent aligns closely with market expectations. The overnight index swap (OIS) market pricing shows only a 6% chance that the BOJ will raise its policy rate from 0.75% this month. However, market expectations for April are quite different, with pricing indicating about a 65% probability of a rate hike at the April meeting.