Nikkei slips, bounces, as Iran oil fears weigh; ING sees BOJ holding at 1.25%, two hikes in 2027

Oil is the dominant risk for Japanese assets near term: as a major energy importer, Japan is exposed to any further rise in crude tied to the Iran conflict, which would pressure corporate margins and the trade balance and keep the yen soft near 157 per dollar. A sustained climb in oil would also reinforce imported inflation, complicating the BOJ’s preference to wait and potentially pulling hike expectations forward from January. With a hold fully priced, the yen and JGB yields are likely to react to guidance rather than the decision, and a more hawkish tone could offer the currency some relief. Tech and chip-related names remain the most sensitive part of the market to risk-off swings driven by Middle East headlines.