Former BoJ economist: Rate hike unlikely this year amid gloomy outlook and tariff uncertainty.
The Bank of Japan is unlikely to raise interest rates in 2025 unless there’s a major breakthrough in U.S. trade policy, according to former BOJ chief economist Seisaku Kameda.
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Kameda called the BOJ’s May outlook “surprisingly dovish”, noting it downgraded both growth and inflation forecasts due to U.S. tariff pressures and weak external demand.
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The BOJ now expects core inflation to peak at 2.2% in FY2025 before dropping to 1.7% in FY2026, below its 2% target.
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Kameda said a dramatic improvement in U.S. tariff policy would be needed for the BOJ to justify any upward revisions in its July 31 report.
With Japanese exports already falling and no trade deal yet with Washington, Kameda believes a rate hike is more likely in January or March 2026, depending on how corporate capital spending and wage growth evolve.
The BOJ raised rates to 0.5% in January but has since turned more cautious, especially given Middle East risks and Trump’s tariff moves. Most economists in a Reuters poll also expect the next rate hike in early 2026
