Bank of Japan Deputy Governor Shinichi Uchida said the central bank will continue raising interest rates if the economy recovers from expected setbacks caused by higher U.S. tariffs, but he warned that the outlook remains highly uncertain.
Uchida told parliament that Japan’s underlying inflation is likely to stay near the BOJ’s 2% target if the economy rebounds as forecast. He added that recent price increases mainly reflect rising import and food costs, including rice.
“We are mindful that such price rises are having a negative impact on people’s livelihood and consumption,” Uchida said.
He added, “If our forecast materialises, we will continue to raise our policy rate.”
However, Uchida cautioned that the future of trade policies and their economic effects remain unclear. “We will determine without pre-conception whether the economy and prices move in line with our forecast,” he said.
Japan’s economy contracted in the March quarter for the first time in a year and at a sharper pace than expected, highlighting the fragility of the recovery amid risks from U.S. President Donald Trump’s trade measures.
The BOJ ended its decade-long stimulus last year and raised its key interest rate to 0.5% in January, signaling readiness to increase rates further if moderate growth supports its inflation target.
But concerns over a global slowdown driven by trade tensions led the BOJ to sharply cut its growth forecasts at its April policy meeting and raised doubts about sustained wage gains supporting consumption and the broader economy.
