Japan, Singapore central banks adjust strategy in response to Trump tariffs

Due to the recent tariffs imposed by the U.S. government, central banks in Singapore and Japan are adjusting their strategies and policies to prepare for the economic impact. 

Ministers of the European Union are convening to discuss and present a unified response, while countries such as Taiwan, India, and Vietnam have stated that they are willing to negotiate to avoid the tariffs.

Central banks in Japan and Singapore are also bracing for impact and are considering adjusting their policies and strategies.

Bank of Japan is cautiously optimistic

The Prime Minister of Japan, Shigeru Ishiba, announced his plans to negotiate with the U.S. to lower the tariffs on Japanese imports. However, he stated that achieving results with his methods will take time.

BOJ officials, including Osaka branch manager Kazuhiro Masaki, who previously headed the BOJ’s division drafting monetary policy, have warned that the consequences of the tariffs are difficult to predict and could cause significant corporate and economic damage. Masaki added that companies in western Japan were already brainstorming ways to cope with downside risks.

“This shock is unlike any other shock in the past in that it is policy-driven. It’s thus hard to examine the potential impact based on past experiences,” he said during a news conference. “The impact could come through many channels, including through trade and market moves.”

The BOJ’s assessment of regional economies, which is based on surveys conducted by its nationwide branches on firms, did not fully incorporate the impact of Trump’s reciprocal tariffs announced last week, Reuters reports.

The Asian share markets tanked on Monday following the announcement of the tariffs as investors feared that they could lead to higher prices, weaker demand, and lead the global economy into recession.

The BOJ’s assessment of regional economies will be among the factors to be scrutinized at its next policy meeting between April 30 and May 1.

Despite these economic issues, the BOJ remains cautiously optimistic. The bank cited that strong consumer spending, driven by the country’s rich tourism industry and luxury goods, would broaden wage increases and solidify capital expenditure plans.

Singapore’s central bank may easy its policy again

In Singapore, the Monetary Authority of Singapore (MAS) is anticipated to ease its monetary policy further during its review on April 14, 2025. The consideration to ease the policy is due to growing concerns over the recently imposed U.S. tariffs and their effect on global trade.

The MAS, which manages policy through the Singapore dollar nominal effective exchange rate (S$NEER), is expected by nine out of ten analysts to reduce the slope of the S$NEER’s trading band, according to a poll ran by Reuters.

It eased its policy for the first time in nearly five years in January 2025. That policy decision was primarily driven by two factors — the country was experiencing a more rapid decline than was anticipated in core inflation, and there was also a projected downturn in economic growth.​

Singapore’s core inflation, which does not include accommodation and private transport costs, had an average of 1.8% in December 2024, its lowest level since November 2021. The low average caused the MAS to revise its 2025 core inflation prediction from an initial range of 1.5%–2.5% to 1%–2%. ​

The MAS also projected a reduction of momentum in Singapore’s growth, forecasting GDP growth between 1% and 3% for 2025, down from an estimated 4.4% in 2024.

Now, due to the U.S. trade policies, the policy might be eased some more. Analysts, including Lee Yen Nee from Fitch Solutions, have warned that the new U.S. tariffs could reduce Singapore’s growth by around 1%, increasing the risk of a global recession that could significantly impact the trade-dependent economy.

“The latest tariff announcement by the U.S. raises the risk of a global recession, which would be very negative for the Singapore economy given how trade-dependent it is,” said Lee.

Currently, Singapore’s GDP forecast is that it will grow between 1% and 3% in 2025. Now, Maybank has revised its GDP growth outlook to 2.1%, and HSBC expects easing due to weak inflation, which fell to 0.6% in February.

RHB economist Barnabas Gan is an outlier among those polled by Reuters. He expects no immediate policy change. He believes that the policy will remain the same due to the resilient growth of the economy and the possibility of reduced tariff risks. He stated that it was worth noting that Singapore has the lowest U.S. tariff rate in Southeast Asia at 10%. He did mention that there could be an easing of the policy in the second half of the year.

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