Japanese economy and foreign economies at a crucial turning point: BOJ's Uchida highlights critical juncture
Bank of Japan Deputy Governor Warns of Global Economic Uncertainty
In a speech delivered in the western city of Kochi, Japan, Bank of Japan Deputy Governor Shinichi Uchida highlighted the critical juncture that the global economy currently finds itself in. Uchida emphasized that the ongoing uncertainty over U.S. tariff measures is a significant factor contributing to this critical juncture [1].
Recovery with Caution
Despite some lingering weaknesses, the current outlook for the Japanese economy, according to Uchida, is one of moderate recovery. This recovery is attributed to the Bank of Japan's accommodative monetary policy and the resilience of the domestic economy [1]. However, Uchida noted significant downside risks due to high uncertainty over trade policies, particularly those of the U.S., which affect both domestic and external demand [2][3].
Monetary Policy Adjustments
The Bank of Japan will continue to raise the policy interest rate and adjust the degree of monetary accommodation in accordance with improvement in economic activity and prices [4]. Uchida stressed the need for the BOJ to balance upside and downside risks while maintaining economic and price stability [3][4]. Given the uncertainty, there is no immediate rush for rate hikes [2][4].
Impact on Wage and Price Adjustments
If the negative impact of tariff policies is more severe than expected, it could weaken the trend of wage hikes. However, if trade negotiations progress favorably, Japanese companies might continue to enjoy strong profits and hike wages [2][5]. Shinichi Uchida also mentioned that profits in the corporate sector will continue to be at a high level, under the assumption that U.S. tariff talks with trade partners will progress to some extent.
The BOJ's Role
The Bank of Japan's approach to monetary policy normalization is being closely watched by global markets, given the bank's significant role in supporting the Japanese economy. The central bank's need for flexibility is particularly relevant in regard to the reduction in the BOJ's purchases of Japanese government bonds, which has been implemented since last August as part of its monetary policy normalization [6].
The ongoing uncertainty over U.S. tariff measures continues to be a significant factor in the global economy's critical juncture. The Bank of Japan will continue to monitor the situation closely and adjust its policy as necessary. Uchida stressed the importance of a certain degree of flexibility to prepare for unexpected developments.
The Bank of Japan's approach to monetary policy adjustments should also consider the ongoing uncertainty over U.S. tariff measures, as this factor can significantly impact both domestic and external demand. A photo capturing this critical juncture in the global economy, with focus on the finance and industry sectors, could serve as a reminder of the current economic uncertainties that the Bank of Japan's policy decisions aim to address.
