Sources: Middle East conflict may lead Bank of Japan to delay March rate hike; the only factor for a hike would be a sharp depreciation of the yen

Odaily News Sources indicate that the renewed market volatility triggered by the Middle East conflict has increased the likelihood of the Bank of Japan delaying a rate hike in March, as policymakers need more time to assess its impact on the economy. The only factor that might prompt the Bank of Japan to raise rates at its March 18-19 meeting would be a sharp depreciation of the yen. Previously, following U.S. strikes on Iran, investors flocked to the safe-haven U.S. dollar, putting pressure on the yen and pushing it close to the 160 level. However, as the expanding Middle East conflict impacts financial markets and pushes up oil prices, the recovery prospects for an economy heavily reliant on imported fuel have been clouded, raising the bar for a March rate hike. Sources pointed out that the central bank is carefully evaluating the impact of the new geopolitical crisis on monetary policy. After Bank of Japan Deputy Governor Ryozo Himino on Monday gave no clear signals about upcoming policy adjustments, markets have also scaled back their bets on a March rate hike. The lack of hawkish signals from senior Bank of Japan officials contrasts with previous practices, where officials typically hinted in advance to avoid catching markets off guard. (Jin10)