Bank of Japan upbeat on wages, sees room to resume rate hikes

The Bank of Japan expects wages and prices to keep rising even as the uncertainty over US tariff policy weighs on the economy, its deputy governor Shinichi Uchida said yesterday, signalling the bank's resolve to maintain its rate-hike stance.

- LEIKA KIHARA

While US tariffs are likely to hurt Japan's economic growth, the BoJ will continue to raise interest rates if the economy and prices improve after a period of stagnation, as the board projects, Mr Uchida told parliament.

"Japan's underlying inflation, and mediumto long-term inflation expectations, are likely to temporarily stagnate. But even during that period, wages are expected to continue rising as Japan's job market is very tight," Mr Uchida said.

"Companies are also expected to keep passing on rising labour and transportation costs by increasing prices," he said.

The BoJ will scrutinise the economic fallout from US trade policy “without pre-conception” as uncertainty surrounding the outlook was extremely high, Mr Uchida added.

The remarks underscore the challenge BoJ policymakers face in balancing headwinds to growth from President Donald Trump's tariff policy, and domestic inflationary pressures from a tight job market and rising raw material costs.