Three informed sources have reported that the Bank of Japan intends to lower its economic growth forecasts during its upcoming meeting scheduled from April 30 to May 1, amid growing concerns over the impact of tariffs imposed by U.S. President Donald Trump, which threaten the stability of an economic recovery that remains fragile and heavily reliant on exports.
The sources, who requested anonymity as they are not authorized to speak publicly, indicated that the central bank is likely to keep interest rates unchanged at their current level of 0.5%, at a time when markets are experiencing sharp fluctuations due to conflicting messages from the U.S. administration regarding trade policy.
According to the quarterly outlook report that will be released on May 1, the Bank of Japan is likely to revise its economic growth estimates for the current fiscal year that began in April, compared to previous forecasts issued in January, which indicated a growth rate of 1.1% for fiscal year 2025.
The same sources noted that there remains a division within the bank's board regarding the extent of the potential damage from U.S. actions, particularly since a substantial part of the impact will depend on the outcomes of the bilateral negotiations between Tokyo and Washington regarding the possibility of exempting Japan from those tariffs.
The sources stated that the Bank of Japan continues to assess whether these negative factors will weaken the positive momentum of inflation, which still remains below the bank's target of 2%. Although the current prevailing trend suggests a delay in the interest rate hike cycle, the bank does not view the path to achieving its inflation target as permanently obstructed.
One source remarked, "It is clear that U.S. tariffs will weigh on the Japanese economy, but there is currently no indication that they are sufficient to cause a drastic shift in the inflation trajectory," a sentiment echoed by two other sources within the bank.
