Bank of Japan (BOJ) Deputy Governor Shinichi Uchida stated that the bank anticipates continued rises in wages and prices, even amidst uncertainty regarding US tariff policy. This signals the BOJ's commitment to maintaining its rate-hike stance. While US tariffs may negatively impact Japan's economic growth, the BOJ intends to raise interest rates if the economy and prices improve following a period of stagnation, aligning with the board's projections.

Uchida noted that Japan's underlying inflation and medium- to long-term inflation expectations are likely to experience a temporary stagnation. However, he emphasized that wages are expected to continue rising due to Japan's tight job market. Furthermore, companies are anticipated to keep passing on rising labor and transportation costs through price increases.

The BOJ plans to carefully scrutinize the economic repercussions of US trade policy, maintaining an open mind due to the high level of uncertainty surrounding the outlook. These remarks highlight the challenge faced by BOJ policymakers in balancing the potential headwinds to growth resulting from President Donald Trump's tariff policy and domestic inflationary pressures stemming from a tight job market and rising raw material costs.

During its April 30-May 1 meeting, the BOJ maintained interest rates at 0.5 percent and significantly reduced its growth forecasts, indicating that the uncertainty surrounding US tariffs and the resulting impact on exports could lead to a period of policy stability. However, some BOJ board members expressed the possibility of resuming rate hikes after a temporary pause if developments related to US tariffs stabilize, according to a summary of opinions released on Tuesday.

While the board generally acknowledged that US tariffs would negatively impact Japan's economy, some members believed that the damage was unlikely to prevent the BOJ from sustainably achieving its 2 percent inflation target. One member suggested that the BOJ should enter a temporary pause in rate hikes due to slowing US growth but should remain flexible and nimble in its monetary policy, resuming rate hikes in response to changes in US policy.

Another opinion stated that the BOJ's policy path could change at any time, as the outlook for Japan's economy and prices could quickly shift depending on developments related to US tariffs. A third opinion emphasized that there is no change to the BOJ's rate-hike stance, as projections indicate that inflation will reach the 2 percent target and real interest rates are deeply negative.

The BOJ's rate review took place amid concerns among policymakers regarding global recession risks resulting from Trump's tariffs. However, global stock markets experienced a surge on Monday after the US and China agreed to reduce steep tariffs for at least 90 days, potentially de-escalating a damaging trade war between the world's two largest economies.

One member noted that the BOJ's growth and price projections are provisional and could be revised significantly in the future, as both the unfolding of US tariff policy and the responses of firms remain uncertain. The board also discussed an upcoming review of the BOJ's bond taper plan, with one member emphasizing the need to scrutinize liquidity conditions for each maturity, given recent significant increases in super-long yields. The BOJ will review its existing bond-taper plan, which runs through March 2026, at its next policy meeting in June and develop a taper plan for fiscal 2026 onward.