Recent forecasts reveal that the Bank of Japan may indicate in its quarterly report, to be released on May 1, that the risks stemming from high U.S. tariffs will not affect the wage increase and inflation cycle, which is considered vital for maintaining higher interest rates.
According to four sources who spoke to Reuters, the assessment scheduled to be included in the report will confirm the Bank of Japan's desire to maintain market expectations for further interest rate hikes, although the timing of the next step may be far off.
One source said, 'It is difficult to predict the actual impact of the tariffs imposed by President Donald Trump on the economy at this stage,' adding that 'the increase in labor shortages has become apparent, which will pressure Japanese companies to continue raising wages.'
Despite the increasing risks, one source believes that these risks are not significant enough to change the Bank of Japan's baseline scenario, which indicates moderate economic recovery.
In this situation, it will be difficult for the Bank of Japan to make decisive decisions regarding interest rates amid the uncertainty of the situation.
The Bank of Japan is expected to cut its economic growth forecasts at its meeting scheduled for May 1, warning of increasing risks associated with the tariffs imposed by Trump, which could affect global demand, and the timing of achieving the two percent inflation target may be postponed to the second half of 2025.
Regarding short-term prices, many policymakers at the Bank of Japan expect to keep the interest rate steady at 0.5 percent at the meeting on April 30 to May 1, 2025.
Meanwhile, some analysts believe that the cautious steps taken by the Bank of Japan, which include maintaining low interest rates, may come under criticism from the United States, which accuses Japan of using weak monetary policy to support its exports.
In a related context, Japanese Finance Minister Katsunobu Kato, along with Bank of Japan Governor Kazuo Ueda, will hold an important meeting in Washington this week as part of the G20 meeting, where the topic of currency prices is expected to be one of the major points of discussion.