Bank of Japan committee member: The October short-term economic survey is crucial for assessing the impact of the trade war
Bank of Japan member Nakagawa stated that the short-term economic outlook survey in October is crucial for assessing the impact of the trade war. She reiterated that if the economic trend aligns with expectations, interest rates will continue to rise, but data must be evaluated cautiously in the face of increasing uncertainty. Nakagawa pointed out that U.S. tariff policies may affect corporate and household confidence, dragging down the Japanese and global economies. Despite the trade agreement reached between Japan and the U.S., uncertainties remain. The market expects that the Bank of Japan may raise interest rates again later this year
According to the Zhitong Finance APP, Junko Nakagawa, a member of the Bank of Japan's Policy Board, stated on Thursday that the ongoing uncertainty brought about by U.S. tariff policies may dampen corporate and household confidence, potentially dragging down the Japanese and global economies.
Although Japan and the U.S. have reached a trade agreement and trade negotiations among other major economies have made progress, "there are still many uncertainties," Nakagawa said in a speech published on the central bank's website. The result is that "corporate and household confidence globally" may be affected, which could "further drag down domestic and foreign economies."
Nakagawa reiterated that if the economic trajectory aligns with expectations, the Bank of Japan will continue to raise interest rates, but emphasized the need for cautious data assessment in light of increasing uncertainties to formulate policies.
She specifically pointed out the importance of the upcoming "Tankan" business sentiment survey results in measuring the impact of trade negotiations among major economies on Japanese companies. The next quarterly Tankan survey will be released on October 1.
Nakagawa, who previously served as the chairman of Nomura Asset Management, is viewed by the market as a neutral stance on monetary policy. After exiting a decade-long massive stimulus program last year, the Bank of Japan raised interest rates to 0.5% in January, believing that Japan is on the verge of consistently achieving its 2% inflation target.
In July, the Bank of Japan maintained interest rates but raised inflation expectations and provided a more optimistic economic outlook, leading to sustained market expectations for interest rate hikes this year. However, the minutes from the July meeting indicated that stubbornly high food inflation and ongoing wage growth prospects have prompted some members to warn of potential second-round price effects, which may necessitate further rate hikes.
In her speech on Thursday, Nakagawa noted that upward pressure on wages could continue to push prices higher, thereby affecting household confidence and inflation expectations.
An August survey showed that nearly two-thirds of economists expect the Bank of Japan to raise the key interest rate by at least 25 basis points later this year, a noticeable increase from just over half a month ago
