Bank of Japan Delays Rate Hike Until 2026 Amid US Tariff Uncertainty

Economists have expressed a strong belief that the Bank of Japan will postpone its next interest rate hike until the first quarter of next year. This decision is primarily driven by the uncertainties surrounding U.S. tariff policies, which have introduced significant volatility into the global economic landscape. The consensus among economists reflects a cautious stance by the central bank, aimed at stabilizing the economy amidst ongoing trade tensions.

The delay in rate hikes is expected to influence the pace of tapering government bond purchases. A majority of the surveyed economists anticipate that the Bank of Japan will slow down the reduction of government bond purchases starting from the next fiscal year. Additionally, three-quarters of the respondents expect the Japanese government to decrease its issuance of super-long-term bonds. This strategic move by the Bank of Japan highlights the policymakers' concerns about the economic outlook, particularly in the face of unpredictable tariff policies from the U.S. administration.

According to the survey, none of the 60 analysts who participated between June 2-10 predicted that the Bank of Japan would raise interest rates at the June 16-17 policy meeting. This unanimous view underscores the widespread expectation that the central bank will maintain its current monetary policy stance until there is greater clarity on the economic impact of U.S. tariff policies. The decision to postpone rate hikes until early 2026 demonstrates the Bank of Japan's commitment to ensuring economic stability during these uncertain times.