According to Toshitaka Sekine, former chief economist at the Bank of Japan, the conflict in Iran has heightened upside risks to inflation, providing justification for the central bank to raise interest rates as early as this month.
In an interview on Wednesday, Sekine stated that if the goal is to assess the situation, taking action in April is feasible. By the end of April, it will be possible to determine whether the impact of the Middle East situation is merely a temporary phenomenon.
Although commentators continue to debate whether geopolitical shocks will lead to inflation or deflation for a resource-scarce country like Japan, Sekine's remarks suggest that the Bank of Japan may have a clearer judgment on the necessity of raising interest rates at its policy meeting on April 28.
Sekine, who served at the Bank of Japan for over 30 years until 2020, speculated that current central bank officials likely share his view, as the minutes from the March policy meeting clearly indicate that board members are increasingly focused on inflation risks.
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