Japan Watch: BoJ Watch: Apr MPM SOP: Hawkish tone as expected

Research evidence excerpt

Japan Watch: BoJ Watch: Apr MPM SOP: Hawkish tone as expected

rices in the petroleum and chemical industries have risen significantly due to the impact of the situation in the Middle

③ East, yen-based export prices in the IT industry have risen on the back of strong global demand. As seen from such developments, the situation differs between industries, and it is

therefore necessary to examine the situation throughout Japan.

The impact of the situation in the Middle East on Japan's economy depends not only on the extent and duration of supply-side constraints for crude oil and products derived from crude

④

oil, but also to a considerable extent on the effects on the supply of other commodities as damage spreads across the Middle East.

There is a possibility that quantitative constraints on petrochemical products will emerge, and while it is difficult to project the extent to which these constraints might push down

⑤

Japan's economy, they could even affect Japan's core industries

Prices

Underlying CPI inflation is likely to increase gradually, as the mechanism in which wages and prices rise moderately in interaction with each other is expected to be maintained.

① Underlying CPI inflation is expected to come to a level that is generally consistent with the price stability target between the second half of fiscal 2026 and fiscal 2027 and remain at

around that level thereafter.

The impact of the situation in the Middle East on the underlying trend in prices will not be significant if crude oil prices return swiftly to previous levels. However, if the pace of recovery

② in the supply of crude oil and other commodities is moderate, this could either push up or push down the underlying trend in prices. If the situation becomes prolonged, risks to