Daiwa Institute of Research: BOJ Sees Broader Cost Pressures as Markets Watch for Further Rate-Hike Signals

An economist at Daiwa Institute of Research said the Bank of Japan cited faster pass-through of higher costs as one reason for raising interest rates, highlighting that import costs have risen recently due to Middle East tensions and are adding to inflation alongside the existing wage-price cycle. According to Jin10, economist Kanako Nakamura said that even if peace talks make progress and oil prices stabilize, the cost increases have already spread from plastics and ethylene to electricity, natural gas, and transportation, suggesting price pressures will persist. Nakamura said market attention is focused on how hawkishly the BOJ will signal the possibility of further rate hikes. She added that the Japan-U.S. interest rate differential continues to put depreciation pressure on the yen, making continued rate increases necessary to prevent further weakening.