IMF says BoJ can see through inflationary pressures from Middle-East conflict as second-round effects will be moderate

The IMF's assessment suggests that the Bank of Japan (BoJ) can maintain its current policy stance despite potential inflationary pressures arising from Middle Eastern tensions, indicating they view these effects as manageable.

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  • Japan has not seen huge pass-through on inflation from weak Yen in 2025.
  • Weak Yen has helped Japan absorb some of the hit from higher US tariffs; the Yen level must be determined by markets.
Context

This perspective may reinforce expectations for prolonged easing in Japan, potentially influencing the JPY's trajectory and creating ripple effects in fixed income and commodity markets, with gold likely reacting to any shifts in sentiment.

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