Bank of Japan Governor Kazuo Ueda said early Friday that US tariffs are likely to exert downward pressure on Japan and the global economies.
Key quotes
"US tariffs are likely to exert downward pressure on Japan, global economies."
"Hard to say now how US tariffs will affect Japan’s price moves."
"Will closely monitor US tariff impact on Japan, overseas economic and price developments in deciding monetary policy."
"We will scrutinise data, including from hearings, available at the time of each policy meeting to gauge US tariff impact on Japan’s economy, prices."
"We will guide monetary policy appropriately from the standpoint of sustainably achieving 2% inflation target."
"When the external environment changes sharply, our growth and price forecasts will change, so will guide monetary policy accordingly in an appropriate manner."
"US tariffs have heightened uncertainty over global, economic outlook."
"March BoJ tankan showed some manufacturers saw hit from US tariff, sluggish Chinese, overseas demand."
"March BoJ Tankan also showed improvement in non-manufacturers' business sentiment reflecting Japan's moderate economic recovery."
"Taken together, we see Japan business sentiment in good shape."
"March tankan underscored our view Japan's economy recovering moderately."
"Due to the survey period, March Tankan may not have fully incorporated impact of US tariff announcements."
Market reaction
At the press time, the USD/JPY pair is up 0.17% on the day to trade at 146.33.
Bank of Japan FAQs
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
The Bank of Japan embarked in an ultra-loose monetary policy in 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.
The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.
A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.
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