After the US and Japan reached a trade agreement, the Deputy Governor of the Bank of Japan stated: There is no urgency to raise interest rates

According to the Zhitong Finance APP, shortly after U.S. President Trump announced a trade agreement with Japan, Bank of Japan Deputy Governor Shinichi Uchida stated in a speech that there is currently no urgent need to raise the benchmark interest rate. Uchida said, "Given the uncertainty surrounding economic activity and price outlook, the Bank of Japan needs to adjust its monetary policy to achieve the best balance between upward and downward risks."

On July 22 local time, Trump announced via social media that the U.S. and Japan had reached a trade agreement: a 15% tariff rate on Japan and $550 billion in Japanese investment in the U.S. The 15% tariff level is lower than the 25% tariff level that Trump had previously indicated would take effect on August 1. Trump stated that under his directive, Japan would invest $550 billion in the U.S., and the U.S. would receive 90% of the profits from this investment. This agreement is expected to create hundreds of thousands of jobs. Trump also mentioned that perhaps most importantly, Japan would open its market for trade, including automobiles, trucks, rice, and other agricultural products and goods. Japan will pay a 15% reciprocal tariff to the U.S.

After Trump announced the progress of the U.S.-Japan tariff negotiations, a Japanese government official revealed that Japan welcomed this, as Trump stated on social media. This is the result of the tough negotiations by Japan's Minister for Economic Revitalization, Ryō Azakawa. Other Japanese government officials indicated that while the specifics are still unclear, reaching an agreement would be a positive outcome for U.S.-Japan relations, significantly alleviating the anxiety of the Japanese public, while also needing to closely monitor the Japanese industry's views on the 15% figure.

Shinichi Uchida did not comment on the breaking news but stated that he is closely monitoring the impact of tariffs and noted that the economy faces "extremely high levels" of uncertainty. Uchida also mentioned, "It is still not entirely clear how trade negotiations between jurisdictions will evolve. Based on the current data from various economies, domestic and international economic activities, price trends, and the direction of global financial and capital markets are also unclear."

As one of the key players in the Bank of Japan's monetary policy over the past decade, Uchida's views are seen as an important indicator of the future direction of Japan's monetary policy. Uchida reiterated that the Bank of Japan's stance is to continue raising interest rates as long as the economic outlook materializes. The deputy governor pointed out that current economic and inflation risks are tilted to the downside, and core consumer prices may fall below 2% at some point. However, he also noted that upward pressure on food prices is becoming evident.

This is also the first significant speech on policy from the Bank of Japan following the Senate elections on July 20. Hideo Kumano, an executive economist at Dai-ichi Life Research Institute and a former Bank of Japan official, stated, "Uchida's speech did not contain much new content; it merely reaffirmed the Bank of Japan's stance." He added, "One of the main highlights of this speech is that even after the elections, the Bank of Japan's interest rate stance has not changed." He further stated, "Without understanding the details of the entire agreement, it is difficult to make a clear judgment on the trade agreement."

Nevertheless, following the news of the U.S.-Japan trade agreement, traders quickly incorporated the possibility of another interest rate hike by the Bank of Japan before the end of this year into their pricing considerations, with overnight index swaps (OIS) indicating a likelihood of over 80% for a rate hike The Bank of Japan will announce its next monetary policy decision on July 31 and simultaneously release a new quarterly economic outlook report. The latest remarks from Shinichi Uchida support the market's broad expectation that the Bank of Japan will maintain the benchmark interest rate at 0.5% next week