IMF Sees BOJ Through Middle East War Inflation Shock

The International Monetary Fund (IMF) says the Bank of Japan can weather inflationary pressures from the ongoing war in the Middle East. According to Rahul Anand, the IMF's mission chief for Japan, any second-round effects on broader prices will be limited.

Anand made his remarks as oil prices surge due to the conflict, adding to mounting inflationary pressures and keeping alive market expectations of a near-term interest rate hike by the BOJ. Investors are focusing on whether the BOJ will raise rates at its April 27-28 policy meeting, chances of which have receded as fading hopes for an end to the U.S.-Israeli war with Iran keep markets volatile.

Anand said that while rising fuel costs from the war will push up headline inflation, the BOJ can stick to its plan of gradual rate hikes. He noted that higher prices are less likely to feed into core inflation or wages, so the second-round impact will be more moderate compared to other countries.