The Bank of Japan is preparing for policy changes in April, indicating a potential interest rate hike under inflationary pressures from the weak yen and Middle East strife.

Governor Kazuo Ueda indicated that the central bank was turning away from a cautious approach to raising borrowing costs due to economic uncertainties, despite maintaining unchanged rates last week.

Ueda said the board will review next month changing guidance that rate hikes would happen “in accordance with improvements” in the economy, which some analysts saw as ruling out a raise while growth was poor.

“We can raise interest rates if we believe downturns are temporary and do not impact inflation,” he stated, departing from his usual focus on growth risks.

Despite Ueda’s bullish comments, the yen plummeted near 160-per-dollar on Monday, disappointing officials concerned about rising import costs due to currency weakness.
Japan’s import-dependent economy is vulnerable to conflict-related fuel price increases.