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Bank of Japan likely to hold key rate at 0.5% as tariff breakthrough evaluated
Bank of Japan likely to hold key rate at 0.5% as tariff breakthrough evaluated

Japan Times

time10 hours ago

  • Business
  • Japan Times

Bank of Japan likely to hold key rate at 0.5% as tariff breakthrough evaluated

The Bank of Japan is expected to hold rates steady during a two-day policy meeting that starts Wednesday. Although Japan and the United States achieved a breakthrough in trade talks last week, analysts said the central bank will likely maintain its cautious stance for some more time. 'It's understandable to think the BOJ's rate hike might come sooner because of the tariff agreement, but I personally believe it's quite unlikely that the bank will do so by the end of the year,' said Masamichi Adachi, an economist at UBS Securities. 'I don't think economic uncertainty in relation to the tariffs will be cleared up in the next few months.' According to a Bloomberg survey of 56 analysts between July 16 and July 22, all those polled said there will be no change in the short-term policy target rate, which is currently 0.5%. Even though the new tariff deal lowers the levy on cars and auto parts to 12.5% from 25%, the rate is still higher than it was prior to the current administration of U.S. President Donald Trump. There is also a new 'reciprocal' tariff rate of 15% for a wide range of exports to the United States, up from an earlier 10% baseline rate. 'For companies that had hoped for more tariff reductions or complete elimination, the agreement is a letdown, which could negatively affect business sentiment,' Takahide Kiuchi, executive economist at Nomura Research Institute, wrote in a report Monday. Last week, BOJ Deputy Gov. Shinichi Uchida said the tariff agreement is 'a huge step forward' that reduces uncertainty for Japanese companies. 'However, we still think uncertainty for the global and the Japanese economies remains high,' Uchida said during a news conference. The market is looking for a possible rate increase in September or October. The Bloomberg survey shows that about 80% of economists expect a move by January. The central bank will be monitoring the effects of the new tariff, and Japan's unstable political situation is expected to make it tougher for it to adjust rates in the coming months, Adachi said. In a historic vote earlier this month, the Liberal Democratic Party-Komeito coalition lost its majority in the Upper House and now controls neither chamber of parliament, although it still has the Cabinet. The defeat has put Prime Minister Shigeru Ishiba, who also heads the LDP, in a tough spot, as he is facing pressure from a number of party members to step down. The BOJ will release a quarterly update on the outlook for the economy and inflation. Some media have reported that the bank may lift its inflation projection due to higher-than-expected food prices. In the outlook released in April, the BOJ projected that consumer prices, excluding volatile fresh food, in the fiscal year through March 2026 will rise 2.2%, and in the following fiscal year, 1.7%. For fiscal 2027, which ends March 2028, the figure was 1.9%. Inflation has topped 3% every month this year, well above the central bank's 2% target, with food inflation topping 6%. Wage increases lagged price increases for a fifth straight month in May.

FOCUS: Trade deal with U.S. still weighs on Japan's inflation-hit economy
FOCUS: Trade deal with U.S. still weighs on Japan's inflation-hit economy

Kyodo News

time5 days ago

  • Business
  • Kyodo News

FOCUS: Trade deal with U.S. still weighs on Japan's inflation-hit economy

TOKYO - The Japan-U.S. trade deal provides only a brief relief, as tariffs remain at higher levels than before, threatening to hinder Japan's inflation-plagued economy from recovering, analysts say. While Japan offered an increased $550 billion investment in the U.S. market, according to a social media post by U.S. President Donald Trump, worries remain about the impact of tariffs on Japanese businesses. Shinichiro Kobayashi, principal economist at Mitsubishi UFJ Research and Consulting, said the deal is positive in a sense that uncertainty was removed for Japanese companies to make business plans. But "the tariff rates have been raised significantly since President Trump took office, and the situation remains the same," he said. The increasing risk of a U.S. economic slowdown means the agreement is not expected to guarantee a boost to Japan's exports, Kobayashi said. Tariffs on steel and aluminum products remain at 50 percent and Trump said he would impose a 50 percent tariff on copper imports and reiterated he will soon unleash sector-based duties, including some aimed at protecting the American pharmaceutical and semiconductor industries. Hideo Kumano, an executive chief economist at Dai-ichi Life Research Institute, said as far as the 15-percent reciprocal tariffs levied on Japanese goods are concerned, "it is difficult to say whether the risk of an economic slowdown for Japan has been removed." Japan's economy shrank an annualized real 0.2 percent in the January-March period, the first contraction in four quarters, as inflation bit into private consumption. Economists expect the Japanese economy to rebound in the April-June quarter but it is unclear whether companies will be able to offer high wage increases next year as seen in recent years if they are suffering from slowing exports to the U.S. market. Higher wages are expected to play a key role for Japan to get back on a steady growth path. A recent surge in long-term interest rates in financial markets also clouds the outlook for Japan's smooth economy recovery, as the move could dent corporate investment and consumer spending. Takahide Kiuchi, executive economist at Nomura Research Institute, said the Japan-U.S. tariff deal is expected to reduce Japan's gross domestic product by 0.55 percentage point in 2025. He had earlier projected the Japanese economy would be cut by 0.85 point under the assumption the reciprocal tariffs would be imposed at 25 percent. On the bright side, Japan and the United States did agree on 15 percent tariffs on Japanese cars and other products in the last-minute trade talks with the Trump administration on Tuesday in Washington. Japanese Prime Minister Shigeru Ishiba urged chief tariff negotiator Ryosei Akazawa to convince the U.S. administration of the benefit of Japan's massive investment plans. According to Akazawa, the prime minister said "What will benefit both Japan and the U.S. is investment rather than tariffs. Don't be afraid and don't give in. Push the point thoroughly." A senior Japanese government official said, "Mr. Trump was insisting on 20 percent (for the car tariff) until the very end. It was eventually dropped to 15 percent, and Mr. Trump seemed dissatisfied." A source close to the matter said Japan's strategy to identify U.S. Commerce Secretary Howard Lutnick as the key negotiator and convince him of the advantages of Japanese investment rather than imposing tariffs on Japan-made goods paid off. Starting in April, the Trump administration imposed a total tariff of 27.5 percent on foreign-made cars, and the president said earlier in the month the United States would impose 25 percent tariffs on imports from Japan starting Aug. 1 under "reciprocal" tariffs. The lower auto tariff, which will have a very large impact on the Japanese economy, is an important achievement," said Mieko Nakabayashi, professor at Waseda University specializing in U.S. politics. "Going forward, the government will be required to provide support to domestic companies in order to cope with the new tariff rates."

Trade deal with U.S. still weighs on Japan's inflation-hit economy
Trade deal with U.S. still weighs on Japan's inflation-hit economy

Japan Today

time5 days ago

  • Business
  • Japan Today

Trade deal with U.S. still weighs on Japan's inflation-hit economy

Screenshot shows a post by White House senior official Dan Scavino on the social media platform X on July 22, 2025, U.S. time, showing Ryosei Akazawa (C, facing camera), Japan's chief tariff negotiator, sitting in front of U.S. President Donald Trump (front L). (Photo not for sale)(Kyodo) ==Kyodo The Japan-U.S. trade deal provides only a brief relief, as tariffs remain at higher levels than before, threatening to hinder Japan's inflation-plagued economy from recovering, analysts say. While Japan offered an increased $550 billion investment in the U.S. market, according to a social media post by U.S. President Donald Trump, worries remain about the impact of tariffs on Japanese businesses. Shinichiro Kobayashi, principal economist at Mitsubishi UFJ Research and Consulting, said the deal is positive in a sense that uncertainty was removed for Japanese companies to make business plans. But "the tariff rates have been raised significantly since President Trump took office, and the situation remains the same," he said. The increasing risk of a U.S. economic slowdown means the agreement is not expected to guarantee a boost to Japan's exports, Kobayashi said. Tariffs on steel and aluminum products remain at 50 percent and Trump said he would impose a 50 percent tariff on copper imports and reiterated he will soon unleash sector-based duties, including some aimed at protecting the American pharmaceutical and semiconductor industries. Hideo Kumano, an executive chief economist at Dai-ichi Life Research Institute, said as far as the 15-percent reciprocal tariffs levied on Japanese goods are concerned, "it is difficult to say whether the risk of an economic slowdown for Japan has been removed." Japan's economy shrank an annualized real 0.2 percent in the January-March period, the first contraction in four quarters, as inflation bit into private consumption. Economists expect the Japanese economy to rebound in the April-June quarter but it is unclear whether companies will be able to offer high wage increases next year as seen in recent years if they are suffering from slowing exports to the U.S. market. Higher wages are expected to play a key role for Japan to get back on a steady growth path. A recent surge in long-term interest rates in financial markets also clouds the outlook for Japan's smooth economy recovery, as the move could dent corporate investment and consumer spending. Takahide Kiuchi, executive economist at Nomura Research Institute, said the Japan-U.S. tariff deal is expected to reduce Japan's gross domestic product by 0.55 percentage point in 2025. He had earlier projected the Japanese economy would be cut by 0.85 point under the assumption the reciprocal tariffs would be imposed at 25 percent. On the bright side, Japan and the United States did agree on 15 percent tariffs on Japanese cars and other products in the last-minute trade talks with the Trump administration on Tuesday in Washington. Japanese Prime Minister Shigeru Ishiba urged chief tariff negotiator Ryosei Akazawa to convince the U.S. administration of the benefit of Japan's massive investment plans. According to Akazawa, the prime minister said "What will benefit both Japan and the U.S. is investment rather than tariffs. Don't be afraid and don't give in. Push the point thoroughly." A senior Japanese government official said, "Mr. Trump was insisting on 20 percent (for the car tariff) until the very end. It was eventually dropped to 15 percent, and Mr. Trump seemed dissatisfied." A source close to the matter said Japan's strategy to identify U.S. Commerce Secretary Howard Lutnick as the key negotiator and convince him of the advantages of Japanese investment rather than imposing tariffs on Japan-made goods paid off. Starting in April, the Trump administration imposed a total tariff of 27.5 percent on foreign-made cars, and the president said earlier in the month the United States would impose 25 percent tariffs on imports from Japan starting Aug. 1 under "reciprocal" tariffs. The lower auto tariff, which will have a very large impact on the Japanese economy, is an important achievement," said Mieko Nakabayashi, professor at Waseda University specializing in U.S. politics. "Going forward, the government will be required to provide support to domestic companies in order to cope with the new tariff rates." © KYODO

India's CAFE norms penalise small cars: Study
India's CAFE norms penalise small cars: Study

Time of India

time18-07-2025

  • Automotive
  • Time of India

India's CAFE norms penalise small cars: Study

Kolkata: A study by the Indian arm of Nomura Research Institute, the largest economic research and consulting firm in Japan, has said that India's policy on fuel efficiency norms for new cars penalises small ones with disproportionately stringent CO2 targets. India's Corporate Average Fuel Efficiency (CAFE) norm's linear weight-based approach is also different from the graded regulations in other major car manufacturing countries, where smaller lightweight cars have relaxed emission norms. "Globally, all major automotive markets including the US, China, Japan, Korea, and Europe offer regulatory protection to small cars under their CAFE frameworks due to their environmental and socio-economic value," the Nomura researchers said. You Can Also Check: Kolkata AQI | Weather in Kolkata | Bank Holidays in Kolkata | Public Holidays in Kolkata Maruti Suzuki has the biggest portfolio of small cars, with 10 models including Alto, Celerio, Wagon R, Swift, Dzire, Eeco and Fronx that weigh less than 1,000 kg and make up 65% of the domestic volumes for the company. Other automakers that have cars under 1 tonne are Renault (Kwid and Kiger), Tata Motors (Punch, Tiago and Altroz), Toyota (Glanza), Hyundai (Exter and i10 Nios), Citroen (C3) and Nissan (Magnite). CAFE norms are set to get more stringent in 2027 and could push compliance costs of small cars beyond affordable levels. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like American Investor Warren Buffett Recommends: 5 Books For Turning Your Life Around Blinkist: Warren Buffett's Reading List Undo Since the introduction of CAFE norms, prices of small cars have shot up due to the need for automakers to invest in technologies that improve fuel efficiency and reduce emissions. Sales of small cars (priced up to Rs 5 lakh) have fallen by 35% per year (compounded annual rate) between 2016-17 and 2024-25.

Trump's 25% tariff to reduce Japan's GDP by 0.8% in 2025: think tank
Trump's 25% tariff to reduce Japan's GDP by 0.8% in 2025: think tank

Japan Today

time09-07-2025

  • Business
  • Japan Today

Trump's 25% tariff to reduce Japan's GDP by 0.8% in 2025: think tank

U.S. President Donald Trump's 25 percent "reciprocal" tariff on imports from Japan, if imposed, is projected to reduce the Asian nation's gross domestic product by 0.8 percent in 2025, according to a private-sector estimate. Over the longer term through 2029, the newly set levy that takes effect on Aug. 1 is estimated to cut Japan's GDP by 1.9 percent, the Daiwa Institute of Research said. Together with other tariffs already imposed by Trump, including the 27.5 percent duty on automobiles, the U.S. trade policy could dent Japan's economy by 1.3 percent in 2025 and 3.7 percent in 2029, the think tank said. Koki Akimoto, an economist at the think tank, said the country-specific tariff, if implemented, will likely have a broad impact on the Japanese economy, ranging from lower production levels for exports and reduced capital investment. Under the so-called reciprocal tariffs, Trump's administration has imposed a baseline duty of 10 percent covering imports from almost all countries in the world, aside from sector-based levies. On Monday, Trump set a new rate of 25 percent for Japan, slightly higher than 24 percent initially announced, while leaving the door open for further negotiations. Takahide Kiuchi, executive economist at the Nomura Research Institute, projected, in total, Trump's tariffs could reduce Japan's GDP by 0.85 percent in around a year. "If they are applied, the Japanese economy is likely to gradually fall into a recession by next year with a probability of (that occurring at) more than 50 percent," he said. © KYODO

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