BOJ will set policy with eye on scale, length of Iran war shock, deputy governor says

The Bank of Japan deputy governor indicated that the BOJ will calibrate its monetary policy in response to the scale and duration of economic shocks stemming from the Iran conflict. The transmission mechanism centers on how prolonged geopolitical instability could disrupt energy supplies, trigger inflationary pressures, and alter global risk appetite, affecting Japan’s import costs and growth outlook. This raises sensitivity in Japanese government bond yields, the yen, and equity markets, particularly energy-importing sectors and exporters reliant on stable global trade. Given Japan’s heavy reliance on energy imports, any escalation that materially affects oil prices or shipping routes would intensify policy dilemmas around maintaining accommodative settings. Traders will watch the next BOJ meeting summary of opinions and revisions to inflation and growth forecasts for signals on policy adjustments.

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