BoJ board member Junko Nakagawa cited US trade policy as one of the most significant risks to Japan’s economic outlook. In a speech, she noted that higher US tariffs could directly damage Japanese corporate activity, pressuring exports, production, sales, capital expenditure, and profitability.

Nakagawa also noted the potential for broader spillover effects, including weakened business and consumer sentiment and volatility in commodity prices and financial markets.

Echoing these concerns, BoJ Governor Kazuo Ueda told the parliament that uncertainty surrounding US policy, especially tariffs, has “heightened sharply” in recent weeks. Ueda stressed that the central bank will assess trade-related developments at each policy meeting without any pre-conception.

While reaffirming BoJ’s intention to raise interest rates if economic and price conditions align with projections, Ueda emphasized, “we must be vigilant to the fact uncertainty surrounding each country’s trade policy is heightening.”

BoJ Governor Kazuo Ueda warned that US President Donald Trump’s escalating tariff policies have “moved closer towards the bad scenario” anticipated by the central bank.

“We will scrutinise without pre-conception the extent to which US tariffs could hurt the economy,” he said in an interview with Sankei newspaper.

“A policy response may become necessary. We will make an appropriate decision in accordance with changes in developments,” he added.

Nevertheless, Ueda reiterated that BoJ will continue to raise interest rates “at an appropriate pace” as long as economic and price conditions align with its projections.

On inflation, Ueda said domestic food price pressures are expected to ease. He sees real wages turning positive and continuing to rise into the second half of the year, supporting consumption and price stability.

Still, he warned of dual risks: persistent inflation driven by global supply shocks, or a consumption drag caused by the rising cost of living.