BoJ's Koeda: Assess Middle East Tensions' Impact on Japan's Exports

BoJ board member Koeda emphasized the need to assess the duration of Middle East tensions and their potential effects on global demand and Japan’s net exports amid current foreign exchange levels. The primary transmission channel is through trade flows and risk sentiment, as prolonged regional instability could disrupt energy supplies and weigh on global growth, impacting Japan’s export-dependent economy. JPY and Japanese government bonds may come under pressure if risk-off dynamics intensify, while Japanese equities—particularly exporters—remain vulnerable to adverse FX moves and weaker external demand. Traders will watch the upcoming Tankan survey and global PMI data for signals on export momentum and manufacturing sector resilience. Any sharp move in crude oil prices due to supply disruptions will also influence BoJ policy considerations and JPY valuation.

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