Main channel is Middle East turmoil raising inflation, lowering real wages, and thus consumption. Downgrade is marginal due to government price controls on fuel and resilient elderly households who don't change consumption with income swings.

Yen is stable around 150-160 and no longer generates massive inflation due to price controls. BOJ's next hike is our base case for April, not July, due to closing output gap and underlying inflation excluding subsidies. High uncertainty is a reason to postpone, but a weak yen causing second-round effects could accelerate a hike.

Monetary policy affects the economy with a 9-12 month lag, making transitory war inflation a reason to wait.