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The Bank of Japan (BOJ) remains committed to its rate-hike stance despite growing concerns over the economic impact of U.S. tariff policy, according to Deputy Governor Shinichi Uchida. Speaking to parliament on Tuesday, Uchida said the BOJ expects wages and prices in Japan to continue rising, supported by a tight labor market and companies passing on higher costs.
Although the BOJ acknowledges that U.S. tariffs, spearheaded by President Donald Trump, could dampen Japan’s export-driven growth, Uchida emphasized that monetary tightening would continue if inflation and the broader economy improve as forecast. He noted that while inflation expectations may stagnate in the short term, structural labor shortages will likely sustain upward wage pressures.
At its latest meeting on May 1, the BOJ held its benchmark rate steady at 0.5% but slashed growth projections, citing uncertainty from trade tensions. However, minutes from the meeting showed that some policymakers remain open to resuming rate hikes if U.S.-China trade relations stabilize.
One board member stressed the importance of flexibility, suggesting the BOJ should act swiftly to resume rate increases if external conditions improve. Another warned that Japan's economic outlook remains highly sensitive to shifts in global trade dynamics, especially U.S. tariff decisions.
The BOJ is also set to review its bond tapering strategy in June. With long-term yields rising, board members highlighted the need to reassess liquidity across bond maturities. The current tapering plan extends through March 2026, but a revised roadmap for fiscal 2026 and beyond is expected.
Despite near-term headwinds, the BOJ maintains its medium-term inflation target of 2%, underscoring its willingness to act should price and wage growth gain traction amid shifting global conditions.
