Japan’s Stagflation Risk Mounts With $100 Oil and Sagging Yen

The surge in oil prices combined with a sagging yen raises the risk that Japan will slide into stagflation, prompting the government to ramp up fiscal spending while complicating the central bank’s mission to normalize its policy settings.

Oil topped $100 per barrel Monday amid escalating hostilities in the Middle East and widening stress on oil shipping operations and the global energy infrastructure. The yen weakened against the dollar, moving closer to a key threshold of 160 per dollar, a level where authorities intervened to support Japan’s currency in 2024. Stocks also tumbled while long-term bond yields rose.