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The Bank of Japan is expected to leave interest rates unchanged at its upcoming Policy Board meeting on Wednesday and Thursday.
Officials said they will watch closely how the escalating Middle East tensions affect economic activity and consumer prices.
Analysts anticipate the central bank will maintain its target for the unsecured overnight call rate, the short-term interbank lending benchmark, at about 0.75 percent.
The decision comes amid rising crude oil prices triggered by the conflict involving U.S. and Israeli forces and Iran, raising concerns about Japan’s energy-dependent economy.
Experts noted that further increases in oil prices could strain production costs and overall economic growth in the country.
The yen has weakened in foreign exchange markets as investors purchase dollars amid uncertainty over the Middle East situation.
The combination of higher oil prices and a weaker yen is expected to increase inflationary pressures, affecting consumer prices and corporate costs.