BY LEIKA KIHARA
TOKYO — The Bank of Japan expects wages and prices to keep rising even as the uncertainty over US tariff policy weighs on the economy, its deputy governor Shinichi Uchida said on Tuesday, signalling the bank’s resolve to maintain its rate-hike stance.
While US tariffs are likely to hurt Japan’s economic growth, the BOJ will continue to raise interest rates if the economy and prices improve after a period of stagnation, as the board projects, Uchida told parliament.
“Japan’s underlying inflation, and medium- to long-term inflation expectations, are likely to temporarily stagnate. But even during that period, wages are expected to continue rising as Japan’s job market is very tight,” Uchida said.
“Companies are also expected to keep passing on rising labour and transportation costs by increasing prices,” he said.
The BOJ will scrutinize the economic fallout from US trade policy “without pre-conception” as uncertainty surrounding the outlook was extremely high, Uchida added.
The remarks underscore the challenge BOJ policymakers face in balancing headwinds to growth from President Donald Trump’s tariff policy, and domestic inflationary pressures from a tight job market and rising raw material costs.
At its April 30-May 1 meeting, the BOJ kept interest rates steady at 0.5 percent and sharply cut its growth forecasts, suggesting the uncertainty surrounding US tariffs and the hit to exports could keep policy in a holding pattern for some time.
But some BOJ board members saw scope to resume rate hikes after a temporary pause if developments over US tariffs stabilize, a summary of opinions at the meeting released on Tuesday showed.
While the board generally saw US tariffs hurting Japan’s economy, some said the damage was unlikely to derail the path toward sustainably achieving the BOJ’s 2 percent inflation target, the summary showed.
