BOJ to delay rate hikes this year due to US tariffs and weak inflation

The Bank of Japan (BOJ) is unlikely to raise interest rates this year unless US tariff policy takes a positive turn, said former central bank chief economist Seisaku Kameda. He noted that May's economic projections now appear overly pessimistic, meaning any rate hike would depend on a major improvement in the global economy.

In May, the BOJ downgraded its GDP and inflation forecasts, citing increasing pressure from US tariffs. The country's exports declined for the first time in eight months, hit by restrictions on automobiles and other goods. Meanwhile, ongoing talks between Tokyo and Washington have yet to yield results, making it difficult to assess the full economic impact.

As Kameda pointed out, without significant shifts in US trade policy, the BOJ’s July outlook is unlikely to turn more optimistic. With inflation, the bank's key gauge, still running below the target, rate hikes remain off the table. Any decision to tighten policy isn’t expected before early 2026, when the data on wage growth and corporate investment become available.