TOKYO – Bank of Japan officials are divided over the prospect of interest rate hikes, with internal discussions highlighting concerns that the ongoing Middle East conflict could undermine economic stability, according to a summary of opinions from the central bank’s latest policy meeting.
The BoJ’s ‘Summary of Opinions,’ released on Thursday, shows a clear rift among board members. Some advocate for beginning policy normalization to address persistent inflation, while others urge caution, citing geopolitical risks from the war between Israel and Iran-backed groups that could disrupt global supply chains and fuel commodity price volatility.
Japan has maintained ultra-low interest rates for decades to combat deflation, but rising consumer prices in recent years have prompted debate about tightening. ‘The Middle East situation is a wild card,’ said a source familiar with the discussions, who spoke on condition of anonymity. ‘It makes the timing for any rate move exceptionally difficult.’
Analysts note that the conflict has already led to higher oil prices, which could push inflation higher in Japan, a net energy importer. However, it also threatens global demand, potentially hurting Japan’s export-reliant economy. ‘This split reflects the broader dilemma faced by central banks worldwide,’ said an economist at a major international bank. ‘They must balance inflation fears against growth risks from external shocks.’
Looking ahead, the disagreement suggests that the BoJ may delay any rate increase until the geopolitical outlook becomes clearer. Market watchers expect heightened volatility in the yen and Japanese bonds as investors gauge the central bank’s next moves amid uncertain global conditions.