The Bank of Japan (BoJ) kept interest rates unchanged, as expected, citing the need to assess the impact of potential U.S. tariffs on Japan’s export-driven economy.
Governor Kazuo Ueda highlighted that while inflation risks could warrant a faster policy adjustment, the BoJ remains cautious amid global uncertainty.
Ueda acknowledged that while Japan’s underlying inflation is gradually rising, it remains below the 2% target.
He pointed to food and fuel prices as key factors influencing household inflation expectations, noting that prolonged increases in rice costs could impact sentiment and spending.
Despite weak consumption data, particularly in food and non-durable goods, he stressed that spending on services and durable goods remains stable.
The BoJ is monitoring the effect of U.S. trade policy, which could impact Japan’s economy through direct tariffs and broader sentiment shifts.
Ueda noted that recent U.S. tariff moves have been swift and unpredictable, adding uncertainty to the outlook. The central bank may incorporate some elements of these risks into its April report.
On wages, Ueda said recent negotiations have exceeded expectations, with increases spreading beyond large firms. He emphasized that if the economy and prices align with BoJ forecasts, further rate hikes remain possible, as real interest rates remain low.
Regarding the BOJ’s ETF holdings, Ueda said policymakers need more time to decide on adjustments.
He reaffirmed the central bank’s commitment to closely tracking inflation, wage trends, and global risks before making any policy changes.