Key insights
- A new BOJ board member warned of potential stagflation in Japan due to the Iran war's impact on oil prices. While primarily focused on Japan, this raises concerns about global economic spillovers, potentially impacting US equities through higher energy costs and reduced global demand. The BOJ's limited options in addressing stagflation could further destabilize global markets.
By Leika Kihara
TOKYO, April 1 (Reuters) - Japan may face stagflation risks from the Iran war that would be challenging to deal with using monetary policy, new Bank of Japan board member Toichiro Asada said on Wednesday.
With Japan having emerged from deflation and now facing inflation, the BOJ can no longer focus solely on keeping monetary policy loose, said Asada, who is viewed as an advocate of expansionary monetary and fiscal policy.
Surging crude oil prices due to the Middle East conflict are increasing inflationary pressures, though raising interest rates to deal with the problem could hurt factory output and jobs, he said.
"Japan could be in a stagflationary trend," Asada said at his inaugural news conference after joining the nine-member board on Wednesday. "It’s hard to deal with such a situation with monetary policy."