According to all 54 economists surveyed by Bloomberg, the Bank of Japan (BOJ) is anticipated to maintain its benchmark interest rate at 0.5% at the conclusion of its two-day meeting on Thursday, potentially signaling a pause in its policy normalization efforts due to heightened global uncertainties from U.S. tariffs.
Meanwhile, officials are not expected to deviate from their path of cautiously increasing interest rates once the economic outlook stabilizes.
BOJ watchers will be closely examining the policymakers’ quarterly economic projections for insights into the duration of the anticipated pause.
According to a Bloomberg report earlier this month citing sources familiar with the matter, BOJ officials see no immediate need to alter their gradual rate increase strategy while they monitor the tariff effects. They also acknowledge that progress toward the 2% inflation target may be delayed.
Izuru Kato, chief economist at Totan Research, noted that the BOJ is in the early stages of its normalization process compared to other central banks and is unlikely to declare the current cycle of rate hikes complete at this time.
Amid increasing uncertainties, expectations for the next BOJ rate hike have become more varied. The percentage of observers expecting a hike by September dropped to 45% from 89%, according to a recent Bloomberg survey.
Japan’s chief trade negotiator, Ryosei Akazawa, is set to continue discussions with U.S. Treasury Secretary Scott Bessent amid escalating tariff tensions. Japan currently faces a 10% baseline tariff, with a postponed 24% levy for 90 days, as well as 25% duties on essential sectors such as steel, aluminum, and automobiles, which are fundamental to Japan’s industrial base.
Analysts predict these tariffs could diminish Japan’s growth by 0.5 percentage points this fiscal year, according to the Japan Center for Economic Research.
