Sources indicate that the Middle East conflict may cause the Bank of Japan to postpone its interest rate hike in March; the only factor contributing to a rate hike would be a significant depreciation

PANews reported on March 3rd that, according to sources cited by Jinshi, the renewed market volatility triggered by the Middle East conflict has increased the likelihood of the Bank of Japan (BOJ) pausing its interest rate hike in March, as policymakers need more time to assess its impact on the economy. The only factor that could potentially prompt the BOJ to raise rates at its March 18-19 meeting is a significant depreciation of the yen. Previously, after the US strike on Iran, investors flocked to the safe-haven dollar, putting downward pressure on the yen and pushing it close to the 160 level. However, as the escalating Middle East conflict impacts financial markets and pushes up oil prices, the recovery prospects of an economy heavily reliant on imported fuel have been clouded, raising the bar for a March rate hike.

Sources indicate that the central bank is carefully assessing the impact of the new round of geopolitical crises on monetary policy. Following Bank of Japan Deputy Governor Ryozo Himino's failure to provide a clear signal regarding upcoming policy adjustments on Monday, the market also lowered its bets on a March rate hike. The absence of hawkish signals from top Bank of Japan officials contrasts with previous practices where officials typically provided advance hints to avoid catching the market off guard.