Trump's auto tariffs make Bank of Japan’s rate hike in May less likely

New tariffs on car imports imposed by US President Donald Trump significantly reduce the likelihood that the Bank of Japan will raise its benchmark interest rate, Bloomberg reported, citing the surveyed experts. 

25% tariffs will affect the key sector of the Japanese economy, which accounts for more than a third of exports to the US. As the news agency noted, the announced measures led to a significant drop in the shares of major automakers. 

Goldman Sachs analysts, assessing the consequences of these restrictions, expect a slight decline in GDP growth rates in Japan. Prime Minister Shigeru Ishiba said that it is possible to introduce countermeasures against the US, while at the same time trying to exempt Japanese cars from the new tariffs.

Atsushi Takeda, chief economist at Itochu Research Institute, notes that the chances of a rate hike in May are diminishing. He believes the central bank will need more time to assess the impact of trade restrictions. At the same time, Kazutoshi Inanome, senior strategist at Sumitomo Mitsui Trust Asset Management, predicts that the rate will fall below 1.5% and sees the new trade restrictions as a serious obstacle for the Japanese economy.