FX.co ★ BoJ Eyes Gradual Policy Shift as U.S. Tariffs Threaten Japan's Outlook

Bank of Japan (BoJ) Governor Kazuo Ueda has articulated that the central bank will only move to increase interest rates when it is assured that both economic and price growth are on a path to acceleration. He reiterated the commitment to phase out bond purchasing beyond March, indicating a gradual move away from ultra-accommodative monetary policy. Governor Ueda highlighted that U.S. tariffs could initially impact Japan’s economy negatively by suppressing exports, thereby affecting corporate profits and consumer sentiment. He pointed out that these tariffs might influence Japanese companies' winter bonus payments and upcoming wage negotiations with unions. Nonetheless, Ueda remains optimistic about the prospects of wage and economic growth regaining strength. The BoJ, which raised rates to 0.5% in January following the conclusion of a significant stimulus package last year, stays open to further rate increases. However, persistent inflation, largely driven by the high cost of rice, complicates the economic outlook. During the June 16–17 meeting, the BoJ will reassess its tapering strategy and present a new bond strategy to be implemented from April 2026 onward.