BOJ Likely to Hold Rates Until July Amid Tariff Uncertainty, Economists Say

The Bank of Japan is expected to keep its key interest rate unchanged through June, according to a Reuters survey conducted from April 14–21. Out of 56 economists, 84% anticipate no rate change at the April 30-May 1 and June 16-17 policy meetings. While a slight majority now forecast a 25-basis-point hike to 0.75% in the third quarter, support has dropped from 70% last month to 52%.

Economists point to U.S. President Donald Trump's fluctuating tariff policies as a major source of uncertainty. Although the BOJ's policy path remains largely intact, the outlook has dimmed due to tariff-related disruptions, especially in manufacturing. Trump's latest moves include a 25% tariff on U.S. car imports and a temporary 10% rate on all Japanese goods, down from an earlier 24%.

Despite these challenges, 87% of surveyed economists believe the risk of recession in Japan remains low. Most respondents agree that the BOJ will lower its economic growth forecast in its next outlook report but is unlikely to cut interest rates. Instead, the bank is expected to emphasize that rising wages and stable inflation support gradual tightening.

Among 39 economists who forecast the timing of a hike, 28% chose July—down from 70% in March—while 23% now expect no increase until 2026 or later. Analysts like Atsushi Takeda from Itochu Research note that while exports may fall, a strong yen and subdued consumer prices could help support domestic demand and corporate earnings.

Markets currently price in a 65% chance of a BOJ rate hike by year-end, reflecting cautious optimism amid geopolitical headwinds and shifting trade dynamics.