BoJ's regional assessment report sees impact of US tariff policies
In its quarterly regional economic report published on Thursday, the Bank of Japan (BoJ) is expected to reflect uncertainty over how US tariffs will affect local businesses.
Additional takeaways
As for impact of trade policies of each countries, some regions said firms were putting off or reviewing capex plans.
Many regions said impact of US tariffs on exports, output limited for now.
Many regions said firms were worried about declining demand from rising US sales prices, slowdown in global economy.
Many regions said wage hikes were at high levels this fiscal year in wide range of industries.
Some regions cited calls by firms that they could cut winter bonuses if profits undershoot estimates.
As for next year's wage-setting, some firms voiced concern over raising wages further while others saw need to keep raising pay to retain talent.
Many regions said firms continued to hike prices to pass on input, labour, distribution costs.
Some regions saw firms holding off price hikes as consumers cut back on spending.
Many regions said services consumption remained firm.
Market reaction
At the time of writing, the USD/JPY pair is trading 0.01% lower on the day to trade at 146.32.
Bank of Japan FAQs
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
The Bank of Japan embarked in an ultra-loose monetary policy in 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.
The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.
A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.
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