Bank of Japan branch manager report: Economic uncertainty remains, adopting a wait-and-see attitude towards further interest rate hikes
The report from the Bank of Japan's branch manager indicates that economic uncertainty still exists, and the central bank is taking a wait-and-see approach when considering further interest rate hikes. The report does not explicitly mention the impact of Trump's tariffs, and it is expected that the benchmark interest rate will remain at 0.5% in the policy decision on July 31. Although the economic performance is acceptable, policymakers want to confirm the specific effects of the tariffs. The report shows a general economic recovery across nine major regions, with wage levels rising broadly, supporting sustainable inflation targets
According to the Zhitong Finance APP, a report from the meeting of branch managers of the Bank of Japan barely clarifies the impact of U.S. President Trump's massive tariffs, highlighting that the Bank of Japan remains in a wait-and-see mode before considering another interest rate hike. The Bank of Japan will announce its next policy decision on July 31, with most observers expecting the benchmark interest rate to remain unchanged at 0.5%.
The quarterly outlook summary from the Bank of Japan's branch managers stated, "Many branches indicated that, so far, factors such as rising uncertainty have had a limited overall impact on production and exports." "Looking ahead, many branches pointed out that businesses are concerned that a slowdown in the global economy and rising output prices in the U.S. may lead to a decline in demand."
Overall, the report indicates that the Bank of Japan is still waiting for more specific tariff impacts to emerge while considering the best timing for further interest rate hikes. Although the Japanese economy is currently performing reasonably well, policymakers may still wish to confirm the specific effects of the comprehensive tariffs pushed by Trump (which will increase to 25% on August 1) and whether these tariffs could potentially be reduced through negotiations.
The report also maintained the Bank of Japan's economic assessment of Japan's nine regions, marking the second consecutive time it has kept the status quo. The report noted that the economies of these nine regions are generally in a recovery or moderate rebound phase.
The report also showed that many regions reported that various industries and businesses of different sizes have generally increased wage levels in the current fiscal year. This ongoing trend of rising wages supports the Bank of Japan's goal of achieving sustainable inflation
