Hard to say how the conflict in the Middle East could affect Japan’s economyMany citizens are worried about rising gasoline pricesThe government is scrutinising to see what steps it can takeAny steps taken to mitigate the impact won’t likely involve changes to the fiscal year 2026 budget
In just a week, Japan has had to pay ~70% more dollars to secure the same amount of oil it needs to run the economy. And that really stings for a country that is ever so heavily reliant on energy imports.
Amid the surge in oil prices, Japan is one of the biggest losers tied to the conflict. The country risks running a further deficit and to think about subsidies to help, that will increase debt pressures even more. And that comes at a poor time amid heavy scrutinise on Tokyo’s finances under Takaichi’s premiership to begin with.
Adding to that is also the disruption looks to throw a wrench in the BOJ’s plans to raise interest rates further. While inflation pressures might go up, it isn’t the kind that the central bank really wants right now. Policymakers are trying to steer clear from cost-push inflation and that is precisely what higher oil prices will bring next.