BOJ seen holding rates as Middle East tensions cloud outlook
Rising oil prices and supply risks are complicating the BOJ’s next move, with some officials seen preferring to wait until June before tightening again.
- The Bank of Japan (BOJ) is expected to skip an interest rate hike at its upcoming policy meeting on April 27-28.
- The primary reason for holding rates is the economic uncertainty caused by prolonged tensions in the Middle East.
- Concerns include soaring crude oil prices, which pose risks to both inflation and economic growth, and potential supply disruptions.
- Due to these uncertainties, some within the BOJ believe the central bank should wait until at least its June meeting to consider a rate increase.
The Bank of Japan will consider skipping an additional interest rate hike at its next policy-setting meeting on April 27-28, Jiji Press learned Monday (April 20).
The move comes amid persistent uncertainties over prolonged tensions in the Middle East, informed sources said.
The Japanese central bank is expected to reach a final decision at the upcoming Policy Board meeting, based on factors such as the outcome of peace talks between Iran and the United States.
BOJ Governor Kazuo Ueda has said that soaring crude oil prices, brought on by the Middle East tensions, pose upside risks to prices and downside risks to the Japanese economy.
There are also concerns that supply disruptions for oil-derived products could deliver a serious blow to the economy.
According to the sources, the BOJ is leaning toward the view that it should carefully consider the timing of a rate hike due to the possibility that the supply disruptions may not be resolved immediately, even if the United States and Iran reach a peace deal.
Facing this situation, some within the BOJ believe that the central bank should wait at least until its June policy-setting meeting to implement a rate hike.
In December last year, the central bank raised its policy interest rate to 0.75 per cent. Nevertheless, Ueda has said that monetary conditions are "still very much accommodative."
Inflationary pressure could increase further if the BOJ falls behind the curve.
[Copyright The Jiji Press, Ltd.]
