Japan Week Ahead: BOJ Seen Standing Pat amid Uncertainty Over U.S.-Iran Standoff in Mideast Peace Talks

–Factory Output, Retail Sales Seen Posting Modest Rebound, Unemployment Stable, Inflation in Tokyo Tame

By Max Sato

(MaceNews) – Here are the key Japanese events for the coming week. Risk-on and risk-off trading is likely to continue in the financial markets as investors watch for news from U.S.-Iran talks aimed at breaking the impasse in reopening the Strait of Hormuz, the key shipping lane for oil and gas exports from the Gulf to the world.

The Bank of Japan’s policymakers are expected to leave the policy interest rate unchanged at 0.75% amid uncertainty over the impact of the Middle East conflict while looking ahead for a better timing to continue lifting the rate toward a more neutral level.

On the data front, both factory output and retail sales are forecast to post a modest rebound in March, unemployment remains stable and inflation in the capital is seen tame thanks to energy subsidies.

Monday, April 27
– The Bank of Japan holds a two-day policy board meeting.

Tuesday, April 28
0830 JST 0830 JST (2330 GMT/1930 EDT Monday, April 27) The Ministry of Internal Affairs and Communications releases the March, fiscal 2025 average unemployment rate.
Mace News median: 2.6% (range: 2.6% to 2.7%) vs. 2.6% in Feb, 18-month high of 2.7% in Jan, 5-month low of 2.4% in July, 2.5% from March to June 2025

The seasonally adjusted unemployment rate in Japan is expected to remain low and stable at 2.6% in March amid lingering labor shortages after slipping to 2.6% in February and ticking up to an 18-month high of 2.7% in January.

It is well below the rates in other major economies as labor shortages continue in the sectors with long work hours and lower pay, notably daycare, medical, transport and construction. Unemployment was stuck at 2.6% from September to December after rising to the level in August from a five-month low of 2.4% in July.

Payrolls are expected to be squarely back on a rising trend after bouncing back in February. The increase has been led by gains in both regular and non-regular positions, after the total number of employed unexpectedly posted its first year-on-year drop in 42 months in January for one-off factors.

The government continues to describe employment conditions as “showing signs of improvement” in its latest monthly economic report for April, unchanged since the last upgrade for the category in June 2023.

Tuesday, April 28
c.1130 JST (c.0230 GMT Tuesday, April 28/c.2230 EDT Monday, April 27) The Bank of Japan releases the outcome of its two-day policy board meeting in a monetary policy statement, the quarterly Outlook Report.

The Bank of Japan’s nine-member board is expected to leave the target for the overnight interest at 0.75% in a majority or unanimous vote, pointing to the uncertainty generated by the Mideast conflict. It would follow “no change” decisions in an 8 to 1 vote in March and January. The bank conducted its first rate hike in six meetings in December by raising it by 25 basis points (0.25 percentage point) to a 30-year high in a unanimous vote.

The board is likely to repeat that it will continue raising rates if growth and inflation evolve in line with its medium-term outlook, noting that real interest rates are at “significantly low levels.” The BOJ has been lifting the policy rate only gradually toward a more neutral level of at least 1%, noting that many firms are likely to continue raising wages into fiscal 2026 that began on April 1.

BOJ Governor Kazo Ueda wishes to keep expectations of higher interest rates alive even if the bank were to stand pat at the upcoming meetings. When the Trump administration imposed stiff import duties in April last year, BOJ policymakers waited patiently for about eight months for global trade row uncertainties to ease before deciding to raise rates.

Higher longer-term inflation expectations amid elevated energy costs are likely to boost underlying inflation, Governor Kazuo Ueda said in a recent speech. “Given that firms have become more assertive in their wage and pricing behavior in recent years, it is important to note that this inflationary mechanism may be stronger now than in the past,” he said, repeating the recent official line.

In March, board member Hajime Takata, formerly with Mizuho Securities, called for a rate increase to 1.0% for the second meeting in a row, arguing that the bank’s 2% inflation target has been “largely achieved” and that Japan’s inflation risks are “skewed to the upside due to second-round effects of price rises stemming from overseas developments.” Takata and his colleague Naoki Tamura, who came from the Sumitomo Mitsui banking group, were advocates for an earlier rate hike before December.

Tuesday, April 28
1530-1615 JST (0630-0715 GMT/0230-0315 EDT Tuesday, April 28) BOJ Governor Kazuo Ueda holds a news conference to discuss the board’s decision.

Wednesday, April 29
– Japanese markets are closed for the Showa Day public holiday, the start of the Golden Week holidays.

Thursday, April 30
0850 JST (2350 GMT/1950 EDT Wednesday, April 29) The Ministry of Economy, Trade and Industry releases preliminary March, Q1, fiscal 2025 industrial output, the outlook for April, May.
Mace News median: +0.7% m/m (range: -1.0% to +2.5%) vs. Feb. revised to -2.0% from -2.1%; +3.0% y/y (range: +0.0% to +5.3%) vs. Feb. revised to +0.4% from +0.3%

Japan’s industrial production for March is forecast to post a modest 0.7% rebound on the month after slipping 2.0% in February and rising 4.3% in January, which was driven by a pickup in passenger cars and rush exports of computer chips, non-ferrous metals and plastics to Asia ahead of the holidays around the Feb. 17 Lunar New Year.

The monthly survey by the Ministry of Economy, Trade and Industry released last month indicated that output would surge 3.8% on the month in March, led by solid demand for production machinery, communications infrastructure and computer chips, before rising a further 3.3% in April on the back of lingering demand for production machinery and communications infrastructure as well higher output of general machinery.

Last month, the ministry repeated that industrial output was “taking one step forward and one step back.” The last change was made in the July 2024 report, when it upgraded its view.

The focus is also on capital goods shipments (ex-transport equipment) for the January-March quarter after they rebounded 1.6% in Q4 on the 1.2% dip in Q3. This should help forecast how business investment fared in Q1 after rising 1.3% on quarter in Q4 to add 0.3 percentage point to GDP growth.

The gross domestic product is expected by economists to post a solid increase in Q1 following a 0.3% rise (1.3% annualized) in Q4, when strong business investment and sluggish but resilient consumption led the rebound from a 0.7% (2.6% annualized) contraction in Q3.

Thursday, April 30
0850 JST (2350 GMT/1950 EDT Wednesday, April 29) The Ministry of Economy, Trade and Industry releases preliminary March retail sales.
Mace News median: +1.0% y/y (range: -0.4% to +1.8%) vs. Feb revised to -0.1% from -0.2%; +0.4% m/m (range: -0.8% to +1.4%) vs. Feb -2.0%

Japanese retail sales are forecast to post a modest 1.0% rise on year in March, propped up by demand for spring clothing, after slipping 0.4% in February in payback for a high level of auto sales in February 2025 and a 10th straight drop in fuel sales.

Last month, the Ministry of Economy, Trade and Industry maintained its assessment, saying retail sales are “on a gradual uptrend.”

Industry data released last week showed department store sales posted the third straight year-on-year increase in March, up 3.2%, after rising 1.6% in February, led by solid demand for spring clothing and high-end watches and jewelries. Sales to visitors from overseas marked their first gain in five months as the weak yen boosted their purchasing power. Chinese tourists continued boycotting Japan over bilateral diplomatic rows while spending by visitors from Taiwan, South Korea, Southeast Asia and the United States more than offset the impact of a 20% drop in sales to visitors from China. 

Thursday, April 30
1400 JST (0500 GMT/0100 EDT Thursday, April 30) The Cabinet Office releases the April consumer confidence survey.

Friday, May 1

0830 JST 0830 JST (2330 GMT/1930 EDT Thursday, April 30) The Ministry of Internal Affairs and Communications releases April Tokyo CPI ahead of the peak of the Golden Week holidays from Monday, May 4 to Wednesday, May 6.
Mace News median: total CPI +1.6% y/y (range: +1.4% to +1.9%) vs. Mar +1.4%; core CPI (ex-fresh food) +1.8% (range: +1.6% to +2.0%) vs. Mar +1.7%; core-core CPI (ex-fresh food, energy) +2.3% (range: +2.0% to +2.5%) vs. Mar +2.3%

Consumer inflation in Tokyo, a leading indicator of the national trend, is expected to remain tame below the Bank of Japan’s 2% target in two of the three key measures in April as energy prices were capped by subsidies aimed at lowering electricity bills during the peak heating season from January to March, with payments through April. Processed food price gains have been slowing after domestic rice supply shortages were resolved last year.

The core measure (excluding fresh food) is forecast to have risen 1.8% on year after the annual rate eased to a nearly two-year low of 1.7% in March from 1.8% the previous month. The annual rate of the total CPI is edging up to 1.6% after slipping to a four-year low of 1.4% from 1.5%. The year-on-year increase in the core-core CPI (excluding fresh food and energy) is projected to be steady at 2.3% after moderating to the rate in March from 2.5% in February.