BOJ Slashes Regional Economies’ Outlook over Ukraine-Russia Crisis

On Monday, the Bank of Japan (BOJ) trimmed its outlook for a majority of its regional economies after its governor cautioned against “very high uncertainty" spurred by the ongoing war between Russia and Ukraine.

According to Reuters, this adds to the rising concern among investors amid spiking commodity prices and soaring inflation which will potentially pave the way for the U.S. Federal Reserve to institute more aggressive interest rate hikes.

In a meeting with the bank’s branch managers, BOJ Governor Haruhiko Kuroda said, "There's very high uncertainty on how developments in Ukraine could affect Japan's economy and prices." The central bank projected a dismal outlook in its quarterly report compared to January’s forecast of eight out of nine of Japan’s major economies. This drop can be attributed to the rise in COVID-19 cases coupled with lasting supply chain issues.

Hirohide Kouguchi, the head of the BOJ’s Osaka branch said, "A further rise in commodity costs could hurt consumption, corporate profits and capital expenditure." He added, "There's also a risk [the Ukraine crisis] could heighten volatility in financial markets, including currency moves, and hurt business sentiment."

©Photo: REUTERS/Kim Kyung-Hoon