PUBLISHED May 28, 2026
The IMF’s Three Scenarios — and What They Miss
According to “みずほ経済ウィークリー 4月22日 ～中東ショックの悪影響は脆弱国に集中～”, published by Mizuho Research Institute on 22 April 2026, the IMF has structured its assessment of the Iran War’s global impact around three scenarios. The reference (早期収束) scenario — equivalent to the IMF’s baseline — assumes early resolution of the conflict and projects 2026 global GDP growth at +3.1 percent, a modest downward revision from the January forecast of +3.3 percent. Without the Middle East conflict, the IMF estimates global growth would have reached +3.4 percent — meaning the conflict has cost the world approximately 0.3 percentage points of growth in this scenario.
The adverse (長期化) scenario assumes a prolonged conflict, with global growth falling to the upper 2 percent range. The severe (激化) scenario assumes an intensification, with growth dropping deeper into the 2 percent range and recovery slow and shallow. Mizuho’s assessment of the IMF’s work is pointed: the IMF’s forecast values may be somewhat optimistic because they do not fully incorporate the potential for supply disruption. The reference case, in other words, may be a best case dressed as a baseline.
The Uneven Distribution: Vulnerable Countries Bear the Brunt
The most important analytical finding in the April 22 Weekly concerns the geographic and structural distribution of the shock’s impact. Mizuho’s own analysis of the IMF’s regional data reveals a pattern of extreme concentration: the countries experiencing the largest adverse effects are those in three specific categories — the conflict zone itself (Middle East), low-income developing countries (particularly sub-Saharan Africa), and energy-importing emerging market economies.
For these vulnerable country groups, the early-resolution scenario alone implies growth deterioration significantly larger than the global average. In the prolonged conflict scenario, the downward pressure on these economies is severe — far exceeding what the global 2 percent headline growth figure implies. Sub-Saharan Africa, which depends heavily on imported fertilisers (a large share of which transit through the Strait of Hormuz), faces both the direct energy price channel and the food price channel simultaneously.
By contrast, the major developed economies — the United States, the European Union, Japan — experience relatively contained impacts even in the adverse scenarios. Their energy supply diversification, financial buffers, and ability to implement policy responses provide insulation that lower-income countries simply do not have. The global growth headline, as Mizuho observes, understates the severity of what is happening in the most exposed economies while overstating the resilience of the countries that actually bear the most damage.
The Fertiliser Shock: Urea Up 54 Percent in One Month
The second major analytical theme of the April 22 Weekly concerns a shock that has received less global attention than oil and gas prices but may prove equally consequential for consumer price dynamics: fertiliser prices. According to World Bank data, the fertiliser price index rose 26 percent month-on-month in March 2026 — a very large single-month increase. Within that aggregate, urea prices surged 54 percent month-on-month — a dramatic spike directly linked to the Strait of Hormuz disruption.
The mechanism is straightforward. Approximately 20 to 30 percent of global fertiliser exports — and approximately 35 percent of global urea exports specifically — transit through the Strait of Hormuz. Saudi Arabia and Qatar are among the world’s largest urea exporters. When the Strait is disrupted, urea supply contracts sharply, and prices respond immediately. The March 2026 reading, while not yet matching the 2021–2022 peaks during the Ukraine conflict period, is already significant and will rise further if the Strait remains restricted.
The consumer price implications are lagged but substantial. Mizuho documents the transmission timeline from the Russia-Ukraine conflict period: food CPI peaked in the United States approximately six months after the fertiliser price shock, in the eurozone approximately thirteen months after, and in Japan approximately nineteen months after. Japan’s peak food CPI increase was smaller in magnitude than in the US and Europe, but the impact lasted longer. Applied to the current shock, this timeline implies that the fertiliser price surge of March 2026 will begin showing up in US food CPI around September 2026, in eurozone food CPI around April 2027, and in Japanese food CPI around October 2027.
One of the most Japan-specific findings in the April 22 Weekly concerns the willingness and speed of Japanese companies to pass cost increases through to customers. Data from Tokyo Shoko Research’s April 2026 survey of 2,837 companies provides a striking comparison with the same survey conducted in April 2022 — the period following the Russia-Ukraine war’s energy price shock.
In 2022, approximately 30 percent of Japanese companies reported that they were able to pass on cost increases to their customers. In April 2026, more than 60 percent report either that they are already passing costs through or will do so within three months. The improvement is dramatic: the culture of cost absorption that characterised Japanese corporate behaviour during previous inflation episodes has partially given way to a more proactive pricing posture.
The oil price implications for Japanese business costs are severe. If oil prices remain above $100 per barrel, 58.4 percent of Japanese companies expect their costs to increase by 20 percent or more compared to the prior year. By industry, construction (70.7 percent) and transportation (68.0 percent) face the largest proportions of companies expecting 20 percent-plus cost increases. These are capital-intensive, fuel-dependent businesses that cannot easily insulate themselves from energy price movements.
The policy implication — consistent with the Bank of Japan’s April Outlook Report — is that inflationary pass-through from the current shock will be faster and broader than during the 2022 episode, precisely because corporate pricing behaviour has changed. The BOJ’s concern about upside inflation risk is grounded in exactly this dynamic.
The second major analytical theme of the April 22 Weekly concerns a shock that has received less global attention than oil and gas prices but may prove equally consequential for consumer price dynamics: fertiliser prices. According to World Bank data, the fertiliser price index rose 26 percent month-on-month in March 2026 — a very large single-month increase. Within that aggregate, urea prices surged 54 percent month-on-month — a dramatic spike directly linked to the Strait of Hormuz disruption.
The mechanism is straightforward. Approximately 20 to 30 percent of global fertiliser exports — and approximately 35 percent of global urea exports specifically — transit through the Strait of Hormuz. Saudi Arabia and Qatar are among the world’s largest urea exporters. When the Strait is disrupted, urea supply contracts sharply, and prices respond immediately. The March 2026 reading, while not yet matching the 2021–2022 peaks during the Ukraine conflict period, is already significant and will rise further if the Strait remains restricted.
The consumer price implications are lagged but substantial. Mizuho documents the transmission timeline from the Russia-Ukraine conflict period: food CPI peaked in the United States approximately six months after the fertiliser price shock, in the eurozone approximately thirteen months after, and in Japan approximately nineteen months after. Japan’s peak food CPI increase was smaller in magnitude than in the US and Europe, but the impact lasted longer. Applied to the current shock, this timeline implies that the fertiliser price surge of March 2026 will begin showing up in US food CPI around September 2026, in eurozone food CPI around April 2027, and in Japanese food CPI around October 2027.
The Iran War is reaching Japan through one channel that receives less analytical attention than energy prices: inbound tourism. March 2026 data shows that overall visitor numbers from abroad held up relatively well — arrivals from Taiwan and other Asian markets offset declines from China. But the Middle East component fell by approximately 30 percent, as flight route suspensions and regional security concerns dramatically reduced inbound travel from Gulf region countries.
Middle Eastern tourists are not a large share of Japan’s total inbound arrivals, but they are a disproportionately high-spending segment. The 30 percent drop in arrivals therefore implies a proportionally larger reduction in inbound consumption spending. Mizuho identifies this as a factor that will continue to weigh on Japan’s inbound tourism receipts for as long as the conflict continues and flight routes to and from the Gulf remain suspended or reduced.
The broader inbound tourism picture for Japan is one of gradual normalisation from the post-pandemic recovery, complicated by the Middle East disruption. The structural strength of Japan as a tourist destination — exchange rate competitiveness, cultural attractiveness, improving transportation infrastructure — remains intact. But the Gulf conflict has temporarily removed one of the highest-spending tourist segments from the market.
The April 22 Weekly’s coverage of Asian monetary policy documents a significant regional shift: across most major Asian central banks, the rate-cutting cycles that began in 2024 and 2025 are pausing or ending. Korea and India held rates steady. Singapore shifted toward a mild tightening of monetary conditions. Mizuho’s assessment is that central banks across Asia are now caught in the same squeeze that the Bank of Japan’s Outlook Report identified for Japan: inflation risks are rising (from energy prices and now fertiliser prices) while growth risks are also rising (from the same energy shock affecting corporate profitability and consumer spending).
This simultaneous upward pressure on inflation and downward pressure on growth — the classic definition of stagflationary risk — leaves Asian central banks with limited options. Cutting rates would support growth but risk accelerating inflation pass-through at exactly the moment when corporate pricing behaviour is becoming more aggressive. Raising rates would suppress inflation but could tip fragile growth into contraction. The result, Mizuho projects, is that most Asian central banks will hold rates unchanged while monitoring how the dual pressures evolve — a policy of watchful patience that mirrors the Bank of Japan’s own explicitly conditional stance.
The April 22 Weekly closes with an observation that cuts across all its country-specific analyses: the aggregation of the Middle East shock’s impact into global growth headlines systematically misrepresents the distribution of damage. A 0.3 percentage point reduction in global GDP growth in the early-resolution scenario sounds manageable. Disaggregated to sub-Saharan Africa, to low-income energy-importing economies in Asia, to the specific industries within major economies most exposed to energy and fertiliser cost increases, the picture is far more severe.
Mizuho’s added observation about rare earth supply chains — documented in an annex to the main report — extends this aggregation point further. If Chinese rare earth export restrictions were to cause an 80 percent reduction in rare earth imports to major industrial economies, GDP impacts would range from 0.5 to 1.8 percentage points for countries where substitution is difficult, compared to less than 0.01 percentage points where supply chains are resilient. The difference between 1.8 percent and 0.01 percent GDP impact from the same physical disruption is entirely a function of supply chain resilience — and that resilience is distributed very unevenly across the global economy.
The Middle East shock, the fertiliser shock, the rare earth risk: none of them are global stories in the aggregate sense. They are stories about which countries, which industries, and which companies are exposed — and which ones are not. The April 22 Weekly’s contribution is to name that distribution with analytical precision rather than consoling average.
The Iran War is reaching Japan through one channel that receives less analytical attention than energy prices: inbound tourism. March 2026 data shows that overall visitor numbers from abroad held up relatively well — arrivals from Taiwan and other Asian markets offset declines from China. But the Middle East component fell by approximately 30 percent, as flight route suspensions and regional security concerns dramatically reduced inbound travel from Gulf region countries.
Middle Eastern tourists are not a large share of Japan’s total inbound arrivals, but they are a disproportionately high-spending segment. The 30 percent drop in arrivals therefore implies a proportionally larger reduction in inbound consumption spending. Mizuho identifies this as a factor that will continue to weigh on Japan’s inbound tourism receipts for as long as the conflict continues and flight routes to and from the Gulf remain suspended or reduced.
The broader inbound tourism picture for Japan is one of gradual normalisation from the post-pandemic recovery, complicated by the Middle East disruption. The structural strength of Japan as a tourist destination — exchange rate competitiveness, cultural attractiveness, improving transportation infrastructure — remains intact. But the Gulf conflict has temporarily removed one of the highest-spending tourist segments from the market.
The April 22 Weekly’s coverage of Asian monetary policy documents a significant regional shift: across most major Asian central banks, the rate-cutting cycles that began in 2024 and 2025 are pausing or ending. Korea and India held rates steady. Singapore shifted toward a mild tightening of monetary conditions. Mizuho’s assessment is that central banks across Asia are now caught in the same squeeze that the Bank of Japan’s Outlook Report identified for Japan: inflation risks are rising (from energy prices and now fertiliser prices) while growth risks are also rising (from the same energy shock affecting corporate profitability and consumer spending).
This simultaneous upward pressure on inflation and downward pressure on growth — the classic definition of stagflationary risk — leaves Asian central banks with limited options. Cutting rates would support growth but risk accelerating inflation pass-through at exactly the moment when corporate pricing behaviour is becoming more aggressive. Raising rates would suppress inflation but could tip fragile growth into contraction. The result, Mizuho projects, is that most Asian central banks will hold rates unchanged while monitoring how the dual pressures evolve — a policy of watchful patience that mirrors the Bank of Japan’s own explicitly conditional stance.
The April 22 Weekly closes with an observation that cuts across all its country-specific analyses: the aggregation of the Middle East shock’s impact into global growth headlines systematically misrepresents the distribution of damage. A 0.3 percentage point reduction in global GDP growth in the early-resolution scenario sounds manageable. Disaggregated to sub-Saharan Africa, to low-income energy-importing economies in Asia, to the specific industries within major economies most exposed to energy and fertiliser cost increases, the picture is far more severe.
Mizuho’s added observation about rare earth supply chains — documented in an annex to the main report — extends this aggregation point further. If Chinese rare earth export restrictions were to cause an 80 percent reduction in rare earth imports to major industrial economies, GDP impacts would range from 0.5 to 1.8 percentage points for countries where substitution is difficult, compared to less than 0.01 percentage points where supply chains are resilient. The difference between 1.8 percent and 0.01 percent GDP impact from the same physical disruption is entirely a function of supply chain resilience — and that resilience is distributed very unevenly across the global economy.
The Middle East shock, the fertiliser shock, the rare earth risk: none of them are global stories in the aggregate sense. They are stories about which countries, which industries, and which companies are exposed — and which ones are not. The April 22 Weekly’s contribution is to name that distribution with analytical precision rather than consoling average.
