The Bank of Japan (BOJ) on Wednesday concluded its two-day meeting with the decision to hold interest rates steady at 0.5%, opting for a wait-and-see approach to assess how potential increases in U.S. tariffs might impact Japan’s export-driven economy.
This move was anticipated as concerns over a global economic slowdown, driven by U.S. President Donald Trump’s tariff policies, took precedence over domestic wage and price data that suggested progress towards the BOJ’s 2% inflation goal.
Following the decision, investors are now keenly awaiting insights from Governor Kazuo Ueda’s briefing, as they seek indications on the timing of the BOJ’s next potential rate hike.
Meanwhile, the meeting of the Japanese central bank preceded that of the U.S. Federal Reserve, which similarly is expected to keep rates stable as it monitors the implications of upcoming U.S. tariffs.
The BOJ conveyed that the nation’s economy is experiencing moderate recovery, while acknowledging some areas of weakness and expressing confidence that increasing wages would support both consumer spending and the broader economic landscape.
It noted that rising rice prices, along with the diminishing impact of subsidies intended to limit fuel costs, are expected to exert upward pressure on core consumer inflation through fiscal 2025. However, uncertainty in Japan’s economic and price outlook were also mentioned, partly attributed to risks associated with the repercussions of international trade policies.
Significant wage hikes offered by large Japanese companies last week, the third consecutive year of such increases, support the BOJ’s belief that sustained wage growth will stabilize inflation around its 2% target.
The BOJ plans to incorporate this data into a quarterly evaluation of its growth and inflation predictions during its policy meeting scheduled for April 30 to May 1, a session that will be pivotal for determining the timing and extent of any additional rate hikes.
In January, the BOJ hiked its benchmark rates to 0.5% after concluding a large-scale stimulus program, based on the assessment that Japan was nearing its long-term inflation goals. The bank has indicated that it remains prepared to raise rates further if economic and price indicators align with its expectations.
According to a Reuters poll, more than two-thirds of economists anticipate a rate increase to 0.75% in the third quarter of 2025, most likely in July.
