Sources: Middle East conflict may cause the Bank of Japan to delay rate hikes in March; the only factor for rate hikes is the significant depreciation of the yen

Odaily Planet Daily reports that sources say the new wave of market volatility triggered by the Middle East conflict has increased the likelihood that the Bank of Japan will delay interest rate hikes in March, as policymakers need more time to assess its impact on the economy. The only factor that could prompt the BOJ to raise rates at the March 18-19 meeting is a significant depreciation of the yen. Previously, after the U.S. struck Iran, investors flocked to safe-haven dollars, pressuring the yen to weaken and approach the 160 level. However, as the Middle East conflict expands, impacting financial markets and pushing up oil prices, the outlook for an economic recovery in a country heavily reliant on imported fuel has darkened, raising the threshold for a March rate hike. Sources indicate that the central bank is carefully evaluating the impact of the new geopolitical crisis on monetary policy. After BOJ Vice Governor Shinichi Ichimura did not send clear signals about an upcoming policy adjustment on Monday, the market also reduced its expectations for a rate hike in March. BOJ officials have not issued hawkish signals, contrasting with previous instances where officials typically hinted in advance to avoid surprising the market. (Jin10)