US trade tariffs have heightened downside risks, says Bank of Japan
By Benjamin Chiou
Date: Friday 28 Mar 2025
(Sharecast News) - The Bank of Japan has said that it is keeping a close eye on the impact of protectionist measures imposed by Donald Trump, with downside risks stemming from trade tariffs having increased.
The comments came at the central bank's latest policy meeting on 18-19 March - minutes of which were released on Friday - when policymakers held interest rates steady in the face of rising inflation.
"For the time being, it is appropriate for the bank to pay close attention to the policies of the new US administration and their impact on the global economy and global financial and capital markets," the BoJ said.
The central bank said that tariff-related uncertainty will have an impact on business and household sentiment around the world. "Therefore, uncertainties regarding the global economy have heightened. [...] In the United States, the risks of both inflation and an economic downturn have heightened."
The BoJ said that it would need to be "particularly cautious" when considering further rate hikes given the increased downside risks to the Japanese economy.
"Downside risks to Japan's economy have increased, with high uncertainties regarding factors such as US tariff policy and supply chain disruptions, and with concern over intensifying competition with Chinese products whose price competitiveness is high.
"It is necessary for the Bank to adjust its monetary policy while carefully examining the earnings and investment of small and medium-sized firms, developments in wages and prices, and the impact of US tariff policy, and it is therefore appropriate for the Bank to maintain the current monetary policy for the time being."
The BoJ held its key short-term interest rate steady at 0.5% earlier this month, keeping it at its highest level since 2008, following an increase from 0.25% in January.
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