The International Monetary Fund (IMF) has advised the Bank of Japan to maintain a flexible and data-responsive stance when contemplating additional interest rate increases, particularly in the context of growing pressure and uncertainty caused by escalating U.S. tariffs. Nada Choueiri, the IMF’s mission chief for Japan, underscored the importance of adaptability and data reliance during periods of significant uncertainty. She called for clear communication from the central bank regarding its interpretation and use of economic data.
This cautionary note comes in the wake of the IMF's recent World Economic Outlook, which revised Japan's growth forecast for 2025 downward by 0.5 percentage points, now projecting a growth rate of 0.6%. This adjustment primarily attributes its rationale to challenges associated with U.S. trade policies. Specifically, 0.28 percentage points of the revision are attributed to tariffs, chiefly those imposed on automobiles and auto parts—industries that account for approximately 40% of Japan's exports to the United States. Japan is currently benefitting from a 90-day suspension of the 24% reciprocal tariffs, yet a baseline 10% tariff and additional 25% duties on vehicles, steel, and aluminum remain enforced.
