US-Iran Conflict Drives Oil Prices; BOJ Raises Inflation Forecast while Keeping Rates Unchanged

(CNA, Tokyo, 28th, Combined Foreign Agencies) As the conflict between the US, Israel, and Iran has caused oil prices to surge, the Bank of Japan (BoJ) decided to keep its benchmark interest rate unchanged at 0.75%. However, it raised its inflation forecast for fiscal year 2026 from 1.9% to 2.8%, while lowering its economic growth forecast from 1.0% to 0.5%.

AFP quoted the BoJ as saying, 'Compared to the previous outlook report, the year-on-year increase in the Consumer Price Index (excluding fresh food) for fiscal 2026 is expected to be significantly higher, and slightly higher for fiscal 2027, reflecting the impact of rising crude oil prices.'

The BoJ also noted, 'The rise in crude oil prices is expected to push up energy and commodity prices, and the trend of passing on wage increases to sales prices is continuing.'

Additionally, the BoJ lowered its economic growth forecast for fiscal 2026 from 1.0% to 0.5%, and for fiscal 2027 from 0.8% to 0.7%.

The conflict intensified on February 28 this year when the US and Israel attacked Iran. Iran subsequently blocked the Strait of Hormuz, a critical global oil shipping lane. This has caused oil prices to skyrocket, driving up global fuel and related product prices, impacting consumer purchasing power and weighing on economies worldwide, posing a major challenge for central banks.

While cutting rates could stimulate growth, it risks further pushing up prices, hurting consumers, and pressuring governments with unstable fiscal positions. The conflict has also put pressure on the Japanese Yen, further expanding Japan's already massive import spending burden. (Compiler: Zhang Mingxuan) 1150428