According to the entity, “it is likely that the economy continues to grow at a rate greater than its potential growth rate”
The Bank’s Policy Council has unanimously decided to maintain the reference interest rate for its operations in “around 0.5%”, given the “great uncertainty” around economic activity and prices in Japan, including the evolution of the situation in terms of trade and economic activity and prices abroad in this context.
According to the entity, “it is likely that the Japanese economy will continue to grow at a rate greater than its potential growth rate”, while the underlying inflation is expected to increase gradually before a growing feeling of labor shortage, with a virtuous cycle between wages and prices that continue to intensify.
Regarding the risks for perspectives, the Bank of Japan considers that great uncertainty persists around economic activity and prices, including the evolution of the situation in trade, economic activity and prices abroad in this situation, as well as the prices of raw materials and the behavior of national companies in setting wages and prices.
In these circumstances, the institution considers it necessary to provide due attention to the evolution of financial and exchange markets and their impact on the economic activity and prices of Japan.
“Since the Bank of Japan is somewhat more concerned about the downward risks for the activity derived from American tariffs than for the risks for inflation, we delay our forecast for the next increase in interest rates from May to July,” said Marcel Thieliant, responsible for Asia-Pacific of Capital Economics.
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