Natixis: Bank of Japan may maintain a hawkish stance, focus on wage negotiations and inflation risks

Golden Ten Data reported on March 18 that Alicia Garcia, Chief Economist for Asia-Pacific at Natixis, stated that the Israel-Iran war has complicated the Bank of Japan's interest rate decision this week, further increasing uncertainty as economic growth faces multiple adverse factors. This conflict will trigger cost-driven inflation in Japan, making the Bank of Japan consider raising interest rates to stabilize the yen and imported inflation. However, Alicia Garcia believes the Bank of Japan will act cautiously. Global uncertainty may dampen companies' willingness to raise wages, and as rising oil prices put pressure on private consumption and corporate investment, preventive rate hikes could undermine the momentum of nominal wage growth. The central bank is likely to take a hawkish stance and remain on hold to avoid interfering with spring wage negotiations, while maintaining a tightening tendency to alleviate a new round of imported inflationary pressures.