BoJ Deputy Governor Shinichi Uchida said in a speech today that Japan’s economy is likely to “moderate” amid slowing global growth, with underlying inflation remaining “sluggish temporarily”. He added that downside risks dominate the outlook, particularly due to high uncertainty surrounding global trade policy and its spillover effects on both domestic and external demand.
Still, Uchida maintained that if the Bank’s baseline outlook holds, gradual rate hikes will continue. With real interest rates deeply negative, the BoJ is positioned to adjust its accommodative stance, but only as long as the economic and inflation path improves as expected.
He also highlighted the crosscurrents in Japan’s inflation profile—cost-push pressures from food remain elevated, while demand-side forces are weak. How businesses adjust wages and prices in response to these forces will be central to determining the sustainability of price growth.
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