Deputy Governor of the Bank of Japan: If the Japanese economy rebounds from the impact of tariffs, interest rates will continue to rise.

The Deputy Governor of the Bank of Japan, Shinichi Uchida, stated that if the Japanese economy rebounds from the expected impact of the increase in tariffs by the United States, the Bank of Japan will continue to raise interest rates, while also warning that the outlook is highly uncertain. Uchida mentioned that if the economy rebounds, Japan's potential inflation rate will remain near the Bank of Japan's target of 2%. He pointed out that the recent rise in domestic prices is mainly due to rising import costs and higher prices of food such as rice. He said, "We note that such price increases have had a negative impact on households and consumption. If our forecasts materialize, we will continue to raise policy rates. However, there is significant uncertainty surrounding trade policy outlooks and their consequences for each country. Therefore, we will determine whether the economic and price trends align with our forecasts without preconceived notions." After exiting a decade-long stimulus policy last year, the Bank of Japan raised interest rates to 0.5% in January this year, hinting that it is prepared to continue raising borrowing costs if Japan sees sustained economic recovery that allows for long-term achievement of the 2% inflation target. Data released last Friday for the March quarter showed that the Japanese economy contracted for the first time in a year, with a faster pace of contraction than expected, highlighting the vulnerability of Japan's economic recovery to the threats posed by President Trump's trade policies. Concerns about the global economic slowdown triggered by Trump forced the Bank of Japan to significantly lower economic growth expectations at its policy meeting on April 30th to May 1st, casting doubt on their belief that sustained wage increases will support consumption and the overall economy.