Akazawa: US tariffs hurt Japan's economy every day

Akazawa: US tariffs hurt Japan's economy every day

The Bank of Japan (BOJ) Governor Kazuo Ueda has expressed confidence in Japan's ability to withstand the economic impact of U.S. tariffs, but the daily struggle is evident. Ueda's comments, made on May 1, 2025, highlighted that while corporate profits and a tight job market serve as buffers, the uncertainty surrounding U.S. trade policies is a significant concern [1].

The BOJ's latest data shows that Japan's economy contracted in the first quarter, with export growth slowing in April. This is an early sign of the toll that steep U.S. tariffs could inflict on the fragile recovery. Ueda noted that recent tariff policies exert downward pressure on the economy through various channels, including corporate and household sentiment [1].

Ueda emphasized that while an agreement between the U.S. and China to scale back tariffs is perceived positively, uncertainty over trade policies remains high. He stated that if trade negotiations proceed and uncertainty diminishes, overseas economies will resume moderate growth, which will accelerate Japan's economic growth [1].

The BOJ's stance on interest rates is closely tied to the economic outlook. Ueda indicated that the central bank is ready to raise interest rates further once it is convinced that economic and price growth will reaccelerate. However, he remained mum on the timing of the next rate hike, noting that it will depend on economic and price developments ahead [1].

The impact of U.S. tariffs is not limited to exports. Japanese companies are delaying capital expenditure plans, and some are even reducing spending. For instance, capital spending in the first quarter grew 6.4% to 18.8 trillion yen ($130 billion), but spending by key export sectors like the auto sector fell 1.4% and spending by makers of factory equipment dropped 4.1% [3].

Ueda also warned that US tariffs could weigh on Japanese companies' winter bonus payments and next year's wage talks with unions. He expects economic and wage growth to reaccelerate, but the uncertainty over trade policies remains high [2].

In conclusion, while the BOJ is cautiously optimistic about Japan's economic resilience, the daily impact of U.S. tariffs is a significant concern. The uncertainty surrounding trade policies and the potential for further tariffs could continue to weigh on Japan's economy.

References:
[1] https://www.tradingview.com/news/reuters.com,2025:newsml_L6N3S60XM:0-boj-chief-voices-confidence-economy-can-withstand-us-tariff-hit/
[2] https://www.chinadailyasia.com/hk/article/613152
[3] https://finance.yahoo.com/news/japan-q1-capital-spending-hits-003110634.html