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2026-04-02 15:42:26
[Former Bank of Japan Official: War Triggers Supply Shock, Central Bank Should Inject Liquidity Instead of Focusing on Interest Rate Hikes] (1) Nobuyasu Atago, a former Bank of Japan official and current chief economist at Rakuten Securities Research Institute, said that the war in Iran could lead to a supply shock and shrinking demand in the Japanese economy, and the central bank may have overlooked this risk due to its excessive focus on inflationary pressures. (2) The central bank has recently released a series of hawkish signals, and the market expects a 70% probability of an interest rate hike in April. The conflict in the Middle East has pushed up oil prices, and the depreciation of the yen has led to increased import costs, further exacerbating price pressures. Although the Bank of Japan kept interest rates unchanged in March, policymakers have discussed further interest rate hikes, and some people are worried that the central bank may have fallen behind in dealing with inflationary risks. (3) Nobuyasu Atago warned that a shortage of naphtha and other chemical products is expected, which poses a greater risk than rising prices and will damage the economy. He likened the situation to a crisis similar to a natural disaster, emphasizing that the priority should be the large-scale disruption of the flow of goods rather than worrying about how high prices will rise. (4) He emphasized that the Bank of Japan should not consider whether to raise interest rates in April, but how to inject liquidity into the market to prevent economic collapse and avoid some companies from going bankrupt.
