BOJ’s Rate Hike Cycle Threatened by U.S. Tariffs: Impact on Japan’s Economy and Exports

Former Bank of Japan (BOJ) official Takako Masai highlighted on Thursday that the ongoing U.S. tariff policies under President Trump could signal the conclusion of Japan’s interest rate hike cycle. With export volumes anticipated to decline, the probability of additional rate increases is waning rapidly. Masai, who maintains strong ties with current economic policymakers, emphasized that the unpredictability of U.S. trade measures is significantly disrupting global markets, adversely affecting Japan’s export sector, industrial output, wage progression, and consumer spending. The imposition of U.S. tariffs on automobiles poses a substantial threat to Japan’s economy, given the automotive industry’s pivotal role. She forecasted that the full economic repercussions might become evident by 2026, as tariff effects typically materialize within a six to twelve-month timeframe. Consequently, Masai suggested that the BOJ could face prolonged constraints on monetary tightening measures, reflecting the broader challenges posed by international trade tensions.