Bank of Japan Governor Kazuo Ueda stated that the conflict in the Middle East presents dual risks of rising inflation and economic slowdown. The Monetary Policy Committee will determine the most appropriate policy response at the end-of-month interest rate meeting to achieve the 2% inflation target.

Ueda told reporters in Washington on Thursday, "Overall, after considering the potential duration of war-related shocks and other economic conditions, we will choose the most suitable response to sustainably achieve the 2% inflation target."

As this could be Ueda's final opportunity to signal policy direction before the BOJ's April 28 interest rate decision, his remarks in Washington were closely watched. Before the previous two rate hikes, Ueda had provided clear hints to prepare markets for the policy decisions.

Before the escalation of Middle East conflicts, most BOJ watchers had anticipated an April rate hike. However, this expectation has cooled in recent weeks. Ueda's emphasis on uncertainties during a speech on Monday further reinforced this trend.

Money market pricing indicates approximately a 19% probability of the BOJ raising the benchmark rate to 1% this month, down from about 55% earlier this week, while the probability of a June rate hike has increased to 76%.