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

the bank of japan held its policy rate at 0.75% on tuesday in a split 6-3 vote. the three dissenters wanted a hike to 1%, arguing middle east tensions skewed price risks up. the boj raised its core inflation forecast sharply to 2.8% from 1.9%, while cutting its 2026 growth forecast to 0.5% from 1%. the bank warned higher oil prices from the iran war would crimp corporate profits and real household incomes. oxford economics' shigeto nagai told cnbc a "very light stagflation-like situation" could hit japan this year, with stagnant growth and inflation above 2%. japan narrowly avoided a technical recession in late 2025, growing 0.3% qoq. inflation accelerated to 1.8% in march, the first rise in five months, driven by energy costs. japan has scrapped gasoline taxes and introduced subsidies to cushion the blow. the 10-year jgb yield hit 2.496% on april 13, the highest since 1997, and was flat at 2.468% after the decision. the nikkei 225 fell over 1%. the yen traded at 159.12 against the dollar, down over 1.5% this year.