Bank of Japan Expected to Hold Rates Next Week, Closely Watching U.S. Tariff Policy

Growth Rate Expected to Be Revised Downward

Ueda Governor of the Bank of Japan AFP Yonhap News

The Bank of Japan, Japan's central bank, is expected to maintain its benchmark interest rate at the current level at the monetary policy meeting scheduled for next week.

According to the Asahi Shimbun and Yomiuri Shimbun on April 26, the Bank of Japan is expected to keep its short-term policy interest rate unchanged at "around 0.5%" during the two-day meeting starting on April 30.

Kazuo Ueda, Governor of the Bank of Japan, who is currently visiting the United States to attend the G20 Finance Ministers and Central Bank Governors Meeting, stated at a press conference on April 24 (local time) that "uncertainty in the global economy is increasing."

Governor Ueda specifically pointed out that the tariff policies of the Trump administration in the United States are expected to lead to a decrease in trade volume, a decline in business and consumer sentiment, and disruptions in supply chains.

The International Monetary Fund (IMF), in a recently released report, projected that due to the Trump administration's tariff measures and the responses from other countries, global economic growth this year will reach only 2.8%, which is 0.5 percentage points lower than the previous forecast. Japan's growth rate was also revised downward by 0.5 percentage points to 0.6%.

The Asahi Shimbun reported that "there is a high possibility that U.S. tariff policies will slow global economic growth," and predicted that the Bank of Japan will lower its growth forecasts and other outlooks in the economic outlook report to be released after this meeting.

However, Governor Ueda reaffirmed his existing stance that if the inflation rate, excluding temporary fluctuations, remains above 2%, the Bank of Japan will proceed with interest rate hikes.

Meanwhile, according to the Yomiuri Shimbun, U.S. Treasury Secretary Scott Besant stated during a meeting with Japanese Finance Minister Shunichi Kato on April 24 that "a weaker dollar and a stronger yen are desirable." This is interpreted as a strong expression of concern over exchange rate levels, reflecting President Trump's intentions.

After the meeting, Minister Kato said that "there was no specific mention from the U.S. side regarding exchange rate levels or targets," but Secretary Besant's remarks are effectively seen as indirect pressure to guard against yen depreciation.

The Asahi Shimbun reported that "Secretary Besant did not make any particular comments regarding the Bank of Japan's monetary policy," and added, "Concerns that the United States would demand a rate hike from the Bank of Japan appear to have been unfounded this time."