Bank of Japan holds rates as Iran war energy shock tests economy

The Bank of Japan opted to hold interest rates, maintaining its current policy stance even as an energy shock stemming from the Iran war threatens to weigh on Japan’s economy. The combination of higher energy costs and geopolitical uncertainty raises downside risks to growth, corporate profits and the yen, which in turn could increase volatility and put pressure on the Japan 225 equity index. Markets are likely to watch for signs the BOJ will shift policy or provide additional support if energy-driven inflation or a weaker growth outlook intensifies. Overall the decision leaves near‑term monetary policy unchanged but highlights vulnerability to external energy shocks that could affect Japanese markets.