The Bank of Japan says higher energy and import costs linked to the Middle East conflict could lead more Japanese companies to increase their prices. A weak yen has also made imported products more expensive, placing additional pressure on households and businesses. At the same time, strong demand connected to artificial intelligence and technology investment is supporting parts of the Japanese economy. The central bank must now balance inflation risks against the danger of slowing economic growth. Further interest-rate increases remain possible, although officials are expected to move carefully because Japan has spent decades dealing with weak inflation and limited consumer demand.
