Japanese economist: If tensions in the Middle East ease, the Bank of Japan may face increased pressure to raise interest rates

(1) Nomura Research Institute economist Takashi Kiuchi stated that if tensions in the Middle East ease before the June 15-16 meeting, the political pressure faced by the Bank of Japan could intensify. (2) He noted that any geopolitical improvement that helps the yen rebound will eliminate market concerns that keeping interest rates unchanged may further weaken the yen, and could prompt Prime Minister Sanae Takaichi to increase behind-the-scenes pressure on the Bank of Japan to abandon a rate hike in June. (3) Takashi Kiuchi predicts that the government and the central bank may head toward a sharp conflict regarding the necessity of a rate hike. However, Finance Minister Satsuki Katayama insisted on Wednesday that both sides share the same outlook on the economy.