On May 30, 2024, the Japanese flag collided at the Bank of Japan headquarters in Tokyo.
Kazuhironogi | AFP | Getty Images
Japan's central bank on Wednesday stabilized its main policy rate of 0.5% in a unanimous vote as export-dependent countries assess the potential impact of US President Donald Trump's protectionist trade policy on the economy.
The move, in line with market expectations, preceded by the US Federal Reserve policy meeting, where central banks are expected to stabilize benchmark interest rates.
“Japan's economy has recovered moderately, but some have seen some weaknesses,” said BOJ policymakers. said in a statement“high uncertainty surrounding Japan's economic activity and prices, including evolving circumstances regarding trade… and wages and pricing behaviors of domestic companies.”
According to Hiroki Shimazu, chief strategist at MCP Asset Management Japan, the bank is believed to be referring to mutual tariffs and sector-specific tariffs Trump is due to be announced on April 2.
Investors will monitor Governor Midorida Governor Kawayama's press conference at 3:30pm local time on Wednesday.
Without mentioning Trump's tariffs, Gieda said last week that he “I'm very worried.” On the uncertainty surrounding economic development overseas.
Following the price decision, the Japanese yen was barely moving and traded at 149.46 against the US dollar. The benchmark Nikkei 225 index has increased by 0.69%.
Analysts believe BOJ will raise interest rates soon, but it is divided into timing for the next hike.
Fred Neumann, chief Asian economist at HSBC, said BOJ could raise interest rates next in June.
“June looks more likely. The market will be a little later. Perhaps July is what the market is thinking now. We're thinking a little before June,” Neumann told CNBC's “Squawk Box Asia” on Wednesday.
“It's not just a condition for the Fed, it actually applies to the BOJ getting evidence that wage increases are actually permeating through the economy,” Neumann said.
“We've only just negotiated by major unions, we don't know what small unions are doing, and we don't know what small businesses are doing, so BOJ tends to wait until June to get all the evidence on wages, then we can pull the trigger,” he added.
BOJ has raised its short-term rate to 0.5% from 0.25% in January since 2008 after finishing its massive stimulus program last year. Central banks have shown that economic growth and inflation could be further raised if they move along that forecast.
“A Noble Cycle”
BOJ has long repeated that its goal is to see the “noble cycle” of rising wage prices in Japan.
Japan's largest labor union announced on Friday that it could secure an average 5.46 Increase in wages Since April – the largest increase in over 30 years.
Japan's Trade Union Federation, or Rengo, with around 7 million members, said the initial tally of results covering 760 unions was 0.18 percentage points higher than last year's 5.28% increase.
Small businesses have increased by 0.67 percentage points from last year, and the first time such businesses have been wage hiking exceeding 5% since 1992, an average rate rise of 5.09%.
Ua Zensen, an umbrella group representing retail, restaurants and other industrial associations, reportedly received by 139 member associations. Average 5.37% increase in monthly wages For full-time workers, the record figure for 2024 was below 5.91%.
In January, Japan had a high inflation rate of 4% over the past two years, and in December household expenditures were significantly below expectations, up 2.7% from the previous year.
The December figures were the fastest household spending to rise since August 2022, and the first year-over-year increase since July 2024. Since then, household expenditures have increased by 0.8% in January.
“Inflation expectations are rising moderately,” the BOJ said in a statement Wednesday, adding that “Rice prices are at high levels and the impact of government measures pushing down inflation will be dissipated by fiscal 2025.”
The revised fourth quarter GDP figures released last week showed that the Japanese economy rose 2.2% on an annual basis, a slower pace than originally reported. The revised data were lower than the median economist forecast.
– CNBC's Sam Meredith contributed to this report.
