The Bank of Japan (BOJ) has decided to maintain its short-term policy rate at 0.5%, citing heightened global economic uncertainties, particularly the potential impact of U.S. tariffs on Japan’s export-driven economy.
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Governor Ueda Highlights Global Risks and Domestic Inflation Pressures
BOJ Governor Kazuo Ueda emphasized the need for vigilance in monetary policy, stating that while Japan’s wage and price conditions are on track, the uncertain U.S. and global outlook makes it difficult to assess the potential impact on Japan’s economy.
Despite these challenges, Ueda noted that rising food costs and stronger-than-expected wage growth could push up underlying inflation, highlighting the central bank’s attention to mounting domestic price pressures.
Tariff Risks Cloud Economic Outlook
The BOJ’s decision comes amid growing concerns over U.S. President Donald Trump’s tariff policies, which have introduced significant uncertainty into global markets. The potential for higher tariffs on Japanese exports, particularly automobiles, poses a risk to Japan’s economic recovery.
Governor Ueda acknowledged that “overseas uncertainty has heightened significantly,” affecting both the U.S. and global economies.
Inflation Trends and Future Policy Considerations
Core inflation in Tokyo has surged to a two-year high of 3.4%, primarily driven by rising food prices and reduced government energy subsidies. This surpasses market expectations and March’s 2.4% rate, signaling growing price pressures.
The BOJ is expected to consider these domestic inflation trends in its upcoming policy meeting on April 30–May 1. However, the central bank remains cautious, balancing the need to address inflation with the risks posed by global economic uncertainties.
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