TOKYO- The Bank of Japan is set to keep interest rates steady this week and discuss just how much of a risk the escalating US trade war poses to the export-reliant economy, which will be key to the timing of its next rate hike.
The market rout and fears of a global slowdown caused by US President Donald Trump’s tariff policy are overshadowing wage and price data showing Japan is making progress towards durably achieving the BOJ’s 2 percent inflation target.
Having just raised interest rates in January, the BOJ is set to maintain its short-term policy rate at 0.5 percent at a two-day meeting that ends on Wednesday.
With policy seen on hold, markets are focusing on Governor Kazuo Ueda’s post-meeting briefing for clues on whether a darkening global outlook could affect the BOJ’s rate-hike path.
“Japan’s economy and price developments appear on track, but overseas risks have risen,” said a source familiar with the BOJ’s thinking. “The heightening global uncertainty is a concern and could affect the BOJ’s rate-hike timing,” the source said, a view echoed by two more sources.
