Bank of Japan to increase interest rates, rules out April 2026 rate cut

Bank of Japan Governor Kazuo Ueda confirmed a commitment to increase interest rates while adjusting monetary support. The likelihood of a rate cut after the April 2026 meeting is at 0.1% YES.

Market reaction

Ueda’s statement reinforces the already near-zero odds of a rate decrease, which sit at 0.1% YES across multiple April sub-markets. This is consistent with the Bank’s gradual normalization strategy amid sustained inflation near its 2% CPI target. Middle East conflicts pushed core CPI to 1.8% in March 2026, but broader inflation measures remain elevated, supporting Ueda’s hawkish stance.

Why it matters

Trading volume is minimal, with just $19 in USDC traded daily, indicating almost no conviction in a rate cut scenario. It takes only $82 to move the odds by 5 points, making this market vulnerable to small trades. The largest single price move in the last 24 hours was negligible, reflecting the market’s current stability.

What to watch

For traders, the focus should be on internal BOJ debates and geopolitical developments. Board members Takata and Tamura have pushed for stronger CPI acknowledgment, suggesting a consensus on tightening, though with caution. A YES share at 0.1¢ pays $1 if a rate cut happens, but the contrarian bet depends on significant geopolitical or economic shifts.

Watch for official BOJ communications or Middle East developments that might alter the inflation outlook. A shift in Ueda’s language or unexpected geopolitical news could move these odds.

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