Analysis: The cautious Bank of Japan may delay action.

Given the large number of media reports stating that the Bank of Japan may maintain interest rates next week, strategists at Daiwa Securities have postponed their rate hike expectations to June. Alex Loo and others stated, "We believe this is a media propaganda campaign by the Bank of Japan, indicating they have made up their minds to delay the rate hike to avoid surprising the market." Market pricing indicates that the threshold for surprises is very high, but although the Bank of Japan may wait to assess the impact of the Middle East conflict, maintaining interest rates unchanged will be a pause, not the end of the rate hike cycle. Economic conditions require further policy tightening as monetary policy remains very accommodative. Terminal rate pricing still exceeds 1.5%, reflecting the market's view that standing still is just delaying the problem.