TOKYO, March 19 — Japan’s central bank said today it expected inflation to increase because of the “recent rise in crude oil prices” caused by the Middle East war.

The Bank of Japan statement—in which it also said it had left its key interest rate unchanged at 0.75 per cent—came as the government began an emergency subsidy programme to drive down the cost of gasoline.

The world’s fourth largest economy depends on the Middle East for 95 per cent of its oil imports.

While Bank officials see the consumer price index easing below two per cent thanks to the easing cost of food including rice—and partly thanks to government measures—they warned “the rate of increase is then expected to (see) upward pressure, affected by the recent rise in crude oil prices”.

Public discontent over rising prices largely contributed to the downfall of former prime minister Shigeru Ishiba, whom Sanae Takaichi succeeded in October vowing to address the issue.

It is hoped the gasoline subsidies will help bring petrol prices to around 170 yen (US$1.06) per litre, Chief Cabinet Secretary and top government spokesman Minoru Kihara said.

That would mark a sharp drop from the record high 190.8 yen per litre seen on Monday.

The average gasoline price in Japan was hovering just below 160 yen per litre before the war began, according to the Oil Information Center, a Japanese industry research body.

Government officials expect it could take up to two weeks for the gas prices to come down to the target level.

The subsidies came days after Japan on Monday started the release of its strategic oil reserves to ensure enough energy supplies in the resource-poor nation.

Kihara said Japan was also coordinating with the Group of Seven industrialised nations and the International Energy Agency “to ensure that there are no disruptions to the supply of petroleum products such as gasoline under any circumstances”.

Takaichi is slated to hold a high-stakes meeting with Donald Trump at the White House, where the US president may press her to offer assistance in trying to reopen the Strait of Hormuz, including possibly sending troops to the region.

The Bank of Japan began hiking rates from below zero in 2024, as figures signalled an end to the country’s “lost decades” of stagnation.

The monetary status quo was widely anticipated by analysts. — AFP