FX.co ★ BOJ to Stay on Tightening Path Despite Tariff Pressures: Governor Ueda

The Bank of Japan is poised to continue increasing the policy rate and adjusting its monetary policies in response to improvements in economic activities and pricing trends, according to Governor Kazuo Ueda. He emphasized that such decisions would be made based on current conditions and without any preconceived notions. Governor Ueda highlighted that U.S. tariffs are impacting exporters' profits, particularly in the automotive sector, although there seems to be minimal broader impact on investment, employment, or wages. While consumer spending is expected to remain robust due to rising incomes, there might be a slowdown in growth as international economies weaken before eventually recovering. Ueda pointed out that over half of the recent CPI (Consumer Price Index) gains are largely attributed to food prices, especially rice, which have been influenced by temporary supply disruptions rather than demand issues. These influences are expected to diminish, with underlying inflation gradually moving towards the 2% target. He also mentioned that strong corporate profits, notably in the non-manufacturing sector, are likely to provide resilience to the economy and support modest growth in wages and prices. However, prolonged global uncertainty may prompt businesses to cut costs, potentially reducing the pass-through of wages.