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Investing.com -- The Bank of Japan is expected to lower its economic growth projections at its upcoming policy meeting on April 30 and May 1, as concerns grow over the impact of tariffs imposed by U.S. President Donald Trump, according to a Reuters report. The trade measures are adding pressure to Japan’s already fragile, export-dependent recovery.
With financial markets still unsettled by Trump’s stance on tariffs, the central bank is widely seen holding off on another rate increase. The current benchmark rate stands at 0.5%.
In its quarterly outlook report, scheduled for release on May 1, the BOJ board is likely to cut its economic growth estimate for the fiscal year that began this month, the report said.
In its previous forecast, issued in January, the bank projected a 1.1% expansion for fiscal 2025.
The report noted that there is no clear agreement within the central bank on the full extent of the economic fallout, as much will depend on whether Japan secures exemptions from U.S. tariffs in upcoming bilateral talks.
The BOJ is closely watching whether it can stick to its baseline scenario that the economy will continue a modest recovery and inflation will stay on track toward the 2% target.
“It’s clear U.S. tariffs will hurt Japan’s economy. What’s less clear is whether the hit is big enough to derail what has so far been a steady uptrend in inflation,” the Reuters report said, citing sources familiar with the matter.
At this stage, the prevailing view within the central bank is that while the tariffs could delay progress, they are unlikely to completely knock inflation off course—an outcome that would be necessary for further rate hikes.
BOJ Governor Kazuo Ueda said in a Wednesday interview that the bank’s intention is to continue raising rates at an “appropriate” pace. However, he also signaled that a policy adjustment might be warranted depending on how significantly the tariffs affect the domestic economy.
According to analysts cited in the report, further insight into the BOJ’s stance could emerge when board member Junko Nakagawa speaks and holds a press conference on Thursday.