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Bank of Japan Likely to Hold Rates Steady Amid U.S. Tariff Concerns

Bank of Japan Likely to Hold Rates Steady Amid U.S. Tariff Concerns. Source: flickr/hiromitsu morimoto

The Bank of Japan (BOJ) is expected to keep interest rates unchanged at 0.5% on Friday, as policymakers assess whether Japan’s economy can endure the impact of U.S. President Donald Trump’s tariffs and a slowdown in American growth. The meeting follows the U.S. Federal Reserve’s recent rate cut, aimed at supporting a weakening labor market.

Governor Kazuo Ueda’s post-meeting remarks are being closely watched for signals on the timing of future rate hikes, which have been on hold since January. Analysts suggest the BOJ may raise rates early next year, though uncertainty over the global outlook and corporate earnings could delay decisions until at least October.

Japan’s fragile recovery has already seen export declines due to trade tensions. Meanwhile, domestic pressures remain, with core consumer prices up 2.7% in August, marking the third straight monthly slowdown but still above the BOJ’s 2% target. Rising food costs and a tight job market have led some policymakers to warn against keeping borrowing costs too low for too long.

Political developments are also adding to the uncertainty. The ruling party’s leadership race begins October 4, following Prime Minister Shigeru Ishiba’s resignation. Frontrunner Sanae Takaichi, a strong critic of BOJ rate hikes, will announce her campaign plans Friday.

A Reuters poll shows most economists expect another 25-basis-point hike by year-end, though opinions are split on whether it will come in October or January. Despite inflationary pressures, Ueda continues to stress a cautious approach, balancing the risks of global trade disputes against the need to safeguard price stability.

The BOJ ended its decade-long stimulus last year, raising rates for the first time in January. However, uncertainty over U.S. tariffs remains the key factor shaping Japan’s monetary policy outlook.

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