BoJ sees US trade deal as boosting chances of meeting inflation goal

Japan's trade deal with the US has reduced uncertainty surrounding the economy, the central bank’s deputy governor Shinichi Uchida said, signalling optimism that conditions for resuming interest rate hikes may start to fall in place.

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Uchida’s remark came hours after US President Donald Trump announced a trade deal with Tokyo that cuts tariffs on Japan's mainstay automobile imports and spares Tokyo punishing new levies on some other goods.

“It's a very big progress that reduces uncertainty for Japan’s economy,” Uchida said on Wednesday, adding that the BOJ will incorporate the deal in its quarterly growth and price projections due at the next policy meeting on July 30-31.

“Given the receding uncertainty, by definition it can be said that the likelihood of Japan durably achieving 2% inflation has heightened,” Uchida told a news conference.

BOJ policymakers have repeatedly said they need to be more convinced that inflation will sustainably hit its 2% target before raising interest rates further.

While there was still some uncertainty on how the tariffs could affect domestic and overseas economies, the BOJ was looking at both upside and downside risks to economic activity and prices, Uchida said.

“The BOJ needs to adjust monetary policy to best balance upside and downside risks from the perspective of maintaining economic and price stability,” Uchida said in an earlier speech to business leaders in the southern west city of Kochi.

He reiterated the BOJ's resolve to continue raising interest rates if the economy and prices move in line with its forecasts.