Monetary Policies of Japan, U.S.: Rising Crude Oil Prices Cast Dark Shadow on Future

Editorial

15:21 JST, March 20, 2026

Due to the situation in Iran, the degree of difficulty in managing monetary policy has increased in both Japan and the United States. It is important to deal with the issue flexibly while keeping a close eye on the economic outlook.

The Bank of Japan decided on March 19 to keep its policy interest rate at around 0.75%. Since raising the rates in December last year, the central bank has refrained from additional rate hikes for two consecutive monetary policy meetings.

Meanwhile, the U.S. Federal Reserve Board, on March 18, decided to maintain its policy interest rate at 3.50%–3.75%. The Fed indicated that it would cut rates once this year by 0.25 percentage points.

The price of U.S. crude oil futures, a key indicator, temporarily exceeded $100 per barrel, heightening concerns about stagflation — a situation in which rising prices and an economic downturn occur simultaneously — on a global scale. Market volatility continues, with the Nikkei Stock Average falling by more than 2,000 points at one point.

The reason both Japan and the United States have adopted a wait-and-see stance is likely because it is difficult to predict how long the war between the United States and Israel on one side and Iran on the other will last, and what negative impact it will have on the economy and prices.

It appears that both Japan and the United States will continue to be caught in a dilemma between whether they should be wary of rising prices or mindful of a recession.

For the BOJ, the focus for the present will be on the timing of additional rate increases. In financial markets, there is a leading view that a rate increase will occur at the next monetary policy meeting in April or June.

The BOJ has so far indicated that it intends to implement additional rate increases if economic and price trends proceed as forecast.

At a press conference, BOJ Gov. Kazuo Ueda noted that the economy has been on a gradual recovery trend and then stated that the central bank would “adjust the degree of monetary easing,” thereby maintaining its course toward raising interest rates.

The trend toward frugality remains strong among consumers due to prolonged high prices, and personal consumption is apparently weak. High oil prices are leading to price increases across a wide range of products and services, from fuel costs such as gasoline and transportation fees to plastic products and industrial goods.

This is a crucial point at which deep analysis is needed as to the risk of a sudden business slowdown. The responsibility to provide explanations so that the government can gain public understanding will become even heavier.

If concerns about accelerating inflation or excessive depreciation of the yen grow stronger, the negative effects of delaying interest rate hikes will become significant. It is essential to keep a close eye on both risks.

If the surge in prices of crude oil — imports of which Japan relies on — persists for an extended period, the trade deficit will widen, making the yen more vulnerable to selling pressure. On March 19, the yen weakened to nearly ¥160 per dollar in the Tokyo foreign exchange market.

At a press conference, Finance Minister Satsuki Katayama warned speculative buyers regarding the foreign exchange market, stating: “We’re watching the situation with a great sense of tension. We will take every possible necessary measure.” The government and the BOJ should work together to ensure they do not neglect necessary actions.

(From The Yomiuri Shimbun, March 20, 2026)