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Investing.com-- Bank of Japan Deputy Governor Shinichi Uchida signaled that the central bank remained cautious on hiking interest rates further, amid persistent uncertainty over the impact of U.S. trade policy on the economy.
Uchida’s comments came just as U.S. President Donald Trump announced a trade deal with Japan, under which Japanese exports to the U.S. will face a 15% tariff.
Speaking at a conference in Kochi, Southwestern Japan, Uchida flagged “extremely high” uncertainty over U.S. trade policy and its impact on global economic growth.
He said that the BOJ will continue to hike rates if the economy and inflation grow in line with its expectations.
But Uchida warned that any negative impact from U.S. tariff policies could offset strong Japanese wage growth, and could also keep the BOJ from hiking rates.
“The (BOJ) needs to adjust monetary policy to best balance the upside and downside risks from the perspective of maintaining stability in economic activity and prices,” Uchida said.
In addition to uncertainty over the impact of U.S. trade policies, the BOJ also has to contend with increased political uncertainty in Japan, especially after the ruling Liberal Democratic Party suffered a bruising defeat in a recent upper house election.
The central bank hiked interest rates by 25 basis points in January, but has declined to signal any further hikes, amid heightened economic and political uncertainty. Sticky Japanese inflation in recent months has pushed up expectations for more rate hikes.