Takako Masai, a former member of the Bank of Japan’s Policy Board, warned on Thursday that US President Donald Trump’s tariff policies may have ended the Bank of Japan’s interest rate hike cycle.
She noted that the uncertainty surrounding US trade policies is causing significant disruptions to the global economy, which could negatively impact Japan’s exports, output, wage growth, and consumption. Specifically, US automotive tariffs are particularly damaging given the significant role the automotive industry plays in Japan’s economy.
Masai predicted that “the real test for Japan’s economy may come in 2026,” as the impact of US tariffs will only start to be felt in six to 12 months.
She added that “the Bank of Japan may not be able to raise interest rates for quite some time,” suggesting that the central bank may need to keep real interest rates low to support efforts to restructure Japan’s economy. This stance is crucial as Japan struggles to reach an agreement with the US in tariff negotiations, which has cast a shadow over the outlook for Japan’s economy.
Masai also highlighted that Japan’s recent inflation has been primarily driven by rising domestic fuel and raw material costs. Given the continued sluggish global demand, this upward trend in Japan is likely to ease in the future.
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