Bank of Japan (BoJ) policy board member Kazuyuki Masu issued a warning on Thursday regarding the potential economic impact of an Iran war-driven energy shock on Japan. Masu stated that such a shock could be more severe for Japan's economy than the first oil shock in 1973, emphasizing that this risk warrants close attention [1]. He identified rising personnel expenses, distribution costs, and the effects of a weak yen as key factors currently underpinning Japan's inflation [1].
Masu also highlighted that, from a long-term perspective, the general price of food will be a crucial determinant of future inflation in Japan [1]. He noted that Japan is no longer in a deflationary period and suggested that negative real interest rates should be addressed as soon as possible [1]. With the policy rate currently near the estimated neutral level, Masu indicated that the BoJ must closely assess prices, employment, and financial conditions before making further policy moves [1].
In terms of market reaction, the USD/JPY currency pair was down 0.02% on the day at 157.85 at the time of reporting [1].
CONCLUSION
BoJ’s Masu’s comments underscore heightened concerns about the potential economic fallout from an Iran war-driven energy shock, which he warns could surpass the impact of the 1973 oil crisis. The market response was muted, with only a slight movement in USD/JPY, as investors await further developments and BoJ policy signals.