Japan’s central bank is stuck between two bad options. Raise interest rates to fight inflation and risk choking an already fragile economy, or hold steady and watch prices climb higher as the Iran conflict sends oil costs soaring.
Nomura analyst Mari Iwashita says the ongoing conflict makes it significantly harder for the Bank of Japan to nail down a timeline for its next rate hike. Markets had been pricing in a move as early as June or July, but that window is looking increasingly uncertain.
The numbers behind the squeeze
Here’s the thing about Japan: it imports nearly all of its energy. That makes it uniquely vulnerable when conflict threatens key oil transit routes like the Strait of Hormuz.
Nomura’s projections paint a clear picture of the damage. The firm estimates the Iran conflict could shave 0.18 percentage points off Japan’s real GDP while pushing inflation up by 0.31 percentage points.
