Rising Oil Prices Threaten Takaichi’s Agenda, Says Monex’s Koll

p{}[4fm4r90aqoz2vojc19zp_media_dl_1.png BloombergArticle content(Bloomberg) — Rising oil prices risk delivering a fresh inflation shock to Japan, complicating Prime Minister Sanae Takaichi’s efforts to ease cost-of-living pressures, according to Monex Group’s Jesper Koll.Sign In or Create an AccountEmail AddressContinueor View more offersArticle contentIf crude trades in a $100 to $120 per barrel range in the coming months, it would amount to a “supply shock” that could add close to half a percentage point to Japan’s consumer inflation, said Koll, expert director at the Tokyo-based firm, in a Bloomberg TV interview Monday. Bloomberg Economics estimates that crude may go to $108 per barrel if the Iran conflict intensifies, more oil infrastructure is struck and the Strait of Hormuz is closed.Article contentWe apologize, but this video has failed to load.Try refreshing your browser, ortap here to see other videos from our team.Article contentArticle contentThat would put the agenda of Takaichi at risk “because she has promised the Japanese people that she would bring energy and food inflation down,” he said. Higher fuel costs would widen Japan’s trade deficit and amplify imported inflation with Japan being a significant net oil importer, potentially adding further pressure on the already-weak yen.Article contentTop StoriesGet the latest headlines, breaking news and columns.There was an error, please provide a valid email address.Sign UpBy signing up you consent to receive the above newsletter from Postmedia Network Inc.Thanks for signing up!A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againInterested in more newsletters? Browse here.Article contentThe currency has fallen about 0.4% against the dollar over the past three months, the worst performance among its Group-of-10 peers. While Takaichi’s resounding lower house election victory last month briefly supported the yen, the currency has since come under renewed pressure following reports that she is wary of further interest-rate hikes and after her nomination of two dovish Bank of Japan board members.Article contentAn oil-driven price surge would also complicate the BOJ’s policy path. Such a shock “is to say that the Bank of Japan hiking interest rates is actually the wrong policy measure,” Koll said, arguing that additional fiscal support for households may be needed instead, a step that could inject further uncertainty into markets.Article contentArticle contentMarkets are already debating whether the central bank will face increased political pressure as it moves to normalize policy, even as Governor Kazuo Ueda appears committed to doing so. Overnight index swaps imply more than a 60% chance of a rate increase by the April meeting, with a quarter-point move fully priced in by July.Article contentMeanwhile, Koll said the outlook for the dollar remains constructive, a dynamic that higher oil prices would likely reinforce. Japanese investors are expected to continue “recycling the big current account surplus to buy global assets, particularly US assets,” he said.Article content—With assistance from Haidi Lun and Avril Hong.Article contentTrending What's at stake for oil markets as Trump strikes Iran Oil & Gas The (high) opportunity cost of paying off your mortgage early Mortgages Stocks and US Futures Decline, Oil Jumps on Iran: Markets Wrap PMN Business US Suffers First War Fatalities as Iran Ramps Up Retaliation PMN Business Explosions in Dubai and Abu Dhabi jolt Mideast financial hubs PMN Business Share this article in your social networkCommentsYou must be logged in to join the discussion or read more comments.Create an AccountSign in Join the Conversation Postmedia is committed to maintaining a lively but civil forum for discussion. Please keep comments relevant and respectful. Comments may take up to an hour to appear on the site. You will receive an email if there is a reply to your comment, an update to a thread you follow or if a user you follow comments. Visit our Community Guidelines for more information. What's at stake for oil markets as Trump strikes Iran Oil & Gas The (high) opportunity cost of paying off your mortgage early Mortgages Stocks and US Futures Decline, Oil Jumps on Iran: Markets Wrap PMN Business US Suffers First War Fatalities as Iran Ramps Up Retaliation PMN Business Explosions in Dubai and Abu Dhabi jolt Mideast financial hubs PMN Business