Mizuho Securities: Oil Price Shock Puts Bank of Japan in Policy Dilemma

Golden Finance reports that on April 27th, Vishnu Varathan of Mizuho Securities stated that the oil price shock triggered by the Middle East war could, on one hand, damage demand, and on the other hand, further exacerbate existing inflation risks. The Bank of Japan expects to hold steady this week. The Bank of Japan is caught in a dilemma because it is unclear which risk will dominate and what corresponding measures should be taken. Inflation already at a high level before the Middle East crisis erupted, along with intense depreciation pressure on the yen, has limited the Bank of Japan’s ability to loosen policy in advance to hedge against potential growth shocks. Meanwhile, the Bank of Japan cannot raise interest rates too quickly or too significantly, or it may undermine the prospects of achieving sustainable, healthy re-inflation. ( Kyodo News )