Middle East conflict lowers odds of near-term rate hike

Japan looks better placed than most Asian economies to weather the disruption to energy supply caused by the conflict in the Middle East. However, a slowdown in economic activity in other countries in the region would weigh on exports and there’s still the risk of a lasting disruption to energy supply that would send energy prices much higher. What’s certain is that a rate hike at the Bank of Japan meeting in a couple of weeks is off the table, though we still expect the Bank to tighten policy settings again in June.