BOJ Officials Signal Pause in Mulling Rate Hike to Watch Tariffs
Governor Kazuo Ueda and a colleague signaled the Bank of Japan will pause in considering interest-rate hikes, stressing the need to monitor uncertainties heightened by US tariff measures.
“We will assess the economy and inflation carefully for an appropriate policy decision by being duly mindful of rising uncertainties stemming from US tariff measures and other issues,” Ueda said in a response to questions in parliament on Thursday.
Fellow board member Junko Nakagawa echoed Ueda’s view in separate remarks, emphasizing that policymakers have to examine economic conditions and tariff impacts without preconception.
“One of the major uncertainties is tariff policies, which could affect Japan’s economy through various channels,” Nakagawa said in a speech in Gunma, north of Tokyo. “It is necessary to monitor developments with high vigilance.”
Their remarks Thursday build on signs that the BOJ isn’t considering a near-term rate hike as it carefully assesses the impacts of President Donald Trump’s global tariff campaign. Those comments dovetail with a recent plunge in market expectations for an increase in rates this year.
Still, both officials noted the BOJ’s long-held stance is that it will raise borrowing costs if the inflation trend improves, signaling their intention to move if the economy avoids a severe downturn.
“We would raise the policy rate and adjust the degree of monetary easing if underlying inflation rises toward 2% as expected,” Ueda said. “That will keep us from falling into a situation where we have to hike rates considerably and rapidly later.”
Data show that Japan’s economy has so far moved in line with the central bank’s outlook. Overall inflation has topped the BOJ’s 2% target for almost three years. Nakagawa on Thursday said long-term inflation expectations among households and businesses are rising gradually, which is a key development for price trends.
The two BOJ officials spoke as the US and Japan kicked off tariff negotiations in Washington. Trump said the negotiators made “big progress,” though tariffs weren’t immediately lifted for the Asian nation.
Japan’s top trade negotiator, Ryosei Akazawa, said he aims to reach a deal as soon as possible, but confirmed the talks didn’t cover currencies, a market focal point. Akazawa said those discussions will mainly be handled by Japan Finance Minister Katsunobu Kato and US Treasury Secretary Scott Bessent.
The BOJ will deliver its next policy decision on May 1. Traders are pricing in around a 1% chance of a hike at that gathering, down from around 20% at the end of last month, according to overnight index swaps.
“We still have two weeks before the meeting and it’s hard to know how much information we will be gathering by then,” Nakagawa told reporters later on Thursday. “I will study those, including the impact of tariffs, objectively.”
Source : Bloomberg
