KEY TAKEAWAYS
- Bank of Japan (BOJ) Governor Ueda Kazuo acknowledged the risks of stagflation stemming from the Hormuz crisis as the BOJ held rates steady at its 18-19 March meeting
- While Ueda said that there is some debate within the policy board over how to respond to stagflation – leaving open the possibility of a hike to curb inflation – his past caution in the face of geopolitical uncertainty suggests the BOJ may be reluctant to act swiftly.
- In the near term, it will be left to the Takaichi government to manage inflationary pressures through subsidies and possible foreign exchange intervention.