BOJ to raise interest rates next quarter with expectations unchanged by Middle East war

The Bank of Japan will keep its key interest rate at 0.75 percent next week but likely raise it to 1.00 percent by end-June, a Reuters poll found, expectations that are broadly unchanged from before the start of the US-Israeli war against Iran.

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War in the Middle East has stoked global inflation fears due to escalated oil prices, complicating the policy path for central banks as they grapple with negative supply shocks and potential hits to economic growth.

Given Japan's heavy reliance on Middle Eastern oil, the BOJ may be more compelled to raise rates as higher crude prices and a weaker yen raise import costs. However, the oil market has also seen sharp swings and its outlook remains highly uncertain.

But for now, expectations have remained broadly similar to a poll last month, as has the stance of policymakers.