Japan says economy is recovering, but flags risks from Trump policies

The Bank of Japan kept interest rates steady on Wednesday and warned of heightening global economic uncertainty, suggesting the timing of further rate hikes will depend largely on the fallout from potentially higher US tariffs.

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But Governor Kazuo Ueda also said rising food costs and stronger-than-expected wage growth could push up underlying inflation, highlighting the central bank’s attention to mounting domestic price pressures.

“Japan's wage and price conditions are on track, possibly stronger than expected. But the uncertain US and global outlook makes it difficult to assess the potential impact on Japan's economy,” Ueda told a press conference.

“As such, we would like to look at upcoming data in early April, to reconsider our forecasts,” Ueda said.

He offered few hints on the next rate-hike timing but said the BOJ did not necessarily need to wait until everything is clear on the impact of US tariffs, in pulling the trigger.

“While there might be factors we may not find out (about) until much later, there are factors we will know fairly soon such as changes in public sentiment,” Ueda said. “We'll make sure not to be too behind the curve" in dealing with domestic inflation risks, he added.

Having just raised interest rates in January,

the board voted unanimously to maintain the bank's short-term policy rate at 0.5 per cent in a widely expected move.