Bank of Japan decided to keep its key interest rate steady, opting not to raise it despite rising fears about tariffs from President Trump.
The yen is struggling and economic growth is sluggish, and the Japanese parliament gears up for an important session next week.
Rising sun, not rising rates
Based on the reports of The Japan Times, the BOJ made this call after a two-day policy meeting where opinions were quite divided, as some analysts thought it was time to bump rates up to 0.5%, while others believed sticking with the current 0.25% was the way to go. The latter view won.
Markets had already started to brace for this decision, anticipating a pause in rate hikes.
This cautious approach follows two rate increases in 2024 that ended a quite long period of negative interest rates.
Trump’s tarrifs
The uncertainty surrounding the BOJ’s decision was intensified by Trump’s threats of additional tariffs on goods from China, Canada, and Mexico.
These tariffs are framed as measures to combat illegal immigration and drug trafficking, they also raise concerns about sparking a bigger conflict within the global commerce.
BOJ talks, markets move
Now, all eyes are on BOJ Governor Kazuo Ueda. Market participants are awaiting his insights on what the bank plans to do next when he addresses the media later.
Will there be more rate hikes on the horizon, or will the BOJ continue to play it safe? Unfortunately, the markets move way too big in correlation with these news.
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