More Japanese Firms Oppose Rate Hikes as Iran War Clouds Outlook: Reuters Poll

A recent Reuters survey reveals a significant shift in sentiment among Japanese businesses regarding monetary policy. A growing majority now express opposition to the Bank of Japan raising interest rates, a stark contrast to earlier expectations. This reluctance is largely attributed to the escalating "Iran war," which has cast a long shadow over the global economic outlook and, consequently, the earnings prospects for Japanese corporations. The survey highlights that nearly 30% of respondents do not want a rate hike at all, a substantial increase from just 17% in January. This sentiment is particularly pronounced among manufacturers and transportation companies, who are already grappling with the immediate impacts of the conflict. Rising crude oil prices, disruptions in fuel and raw material procurement, and increased transportation costs are top concerns. Many firms fear that shortages of essential materials could lead to stalled production and decreased shipments. Furthermore, the lingering effects of U.S. tariffs on trade continue to be a factor for some businesses. The Bank of Japan itself, through Governor Kazuo Ueda, has acknowledged the need for vigilance regarding the fallout from the Iran war, signaling a potential shift in its approach to monetary policy. From a Japanese perspective, this heightened caution is understandable; the nation's heavy reliance on imported energy, particularly crude oil from the Middle East (94% in 2025), makes it exceptionally vulnerable to geopolitical instability and price shocks. Therefore, any move that could further dampen economic activity, such as an interest rate hike, is viewed with considerable apprehension. The survey's findings underscore a desire for stability and predictability in the economic environment, especially when global uncertainties are high.

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We have a tense Middle East situation and lofty crude oil prices. What can be a reason for raising rates?