The Bank of Japan is expected to hold off on raising interest rates until at least March to gauge the economic fallout from new U.S. tariffs, former BOJ policymaker Makoto Sakurai said.
President Trump this week notified 14 countries, including Japan, of higher tariffs set to take effect August 1. The blow to exports and stalled trade talks will likely force the BOJ to cut growth forecasts in its July 31 projections.
Sakurai noted the central bank will need to see if companies continue to raise wages and capital spending before resuming hikes. Key indicators will include the Tankan business survey in October and corporate wage plans due in early autumn.
"Trump’s announcement has undermined conditions for a rate increase this year," Sakurai said, adding Japan may struggle to secure exemptions on auto tariffs.
While the BOJ aims to eventually lift rates to 1–1.5%, he said the economic uncertainty makes further hikes hard to justify for now. If tariffs severely squeeze corporate profits, the timeline could slip into fiscal 2026, which starts next April.
The BOJ ended its massive stimulus last year, raising rates to 0.5% in January amid rising inflation. But Governor Kazuo Ueda has since signalled a pause as inflation remains above target and global risks mount.