Bank of Japan Raises Concern Over Economic Strain From Middle East Crisis

The Bank of Japan has warned that rising oil prices and supply disruptions from Middle East tensions could weigh on economic growth.

The Bank of Japan says surging energy costs and supply chain disruptions are already affecting businesses across regions, even as policymakers remain divided between inflation risks and downside threats to growth.

In its quarterly report, the central bank noted that firms in several regions are feeling pressure from higher input costs and delays in raw material supplies.

Some companies warned that prolonged uncertainty could hurt profits and consumer spending.

Officials also flagged the risk of broader disruption if tensions escalate, particularly due to the closure of the Strait of Hormuz ,a critical route for global oil and gas shipments. The shutdown has driven up crude prices and strengthened the dollar against the yen.

Regional reports highlighted early impacts. In Osaka, a chemical company reduced output over supply concerns, while a transport firm rerouted exports to avoid affected routes, increasing costs.

“The impact seems limited for now, but could broaden if the conflict persists,” said Kazuhiro Masaki, noting that firms are increasingly worried not just about prices but the availability of goods.

Despite these concerns, the BOJ maintained its overall positive assessment of Japan’s economy, supported by tourism and wage growth.

However, uncertainty over the conflict could influence companies’ wage plans and future investment decisions.

The report will be a key factor in the BOJ’s upcoming policy meeting, where markets currently see a strong rate hike, even as risks from the Middle East continue to cloud the outlook.