[TOKYO] The impact on Japan’s output and exports from US tariffs is limited for the time being but many companies are worried about the risk of tariffs weakening global demand, the Bank of Japan said on Thursday (Jul 10).
Some areas in Japan have seen companies delay or review capital expenditure plans, whereas others have seen companies increase spending to streamline operations and cope with labour shortages, showed a summary of the BOJ’s quarterly meeting of regional branch managers.
“At present, the impact was limited overall,” the bank said about how higher US tariffs were affecting exports and factory output across Japan.
“As for the outlook, many regions saw companies voice concern about slumping demand from rising US sales prices and a slowdown in the global economy,” the bank said.
The findings, from surveys conducted by regional branch managers, highlight how companies are not able to fully grasp the potential impact of higher US tariffs due to the mutability of US President Donald Trump’s trade policy.
They do not reflect Trump’s announcement on Monday to raise tariffs on Japanese goods to 25 per cent from 10 per cent unless a trade deal is struck by August 1, a BOJ official told reporters.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
In a separate report, the BOJ said the economies of all nine regions were recovering moderately, maintaining its assessment from three months earlier.
The summary and report will be among factors the BOJ will scrutinise at its next policy meeting on July 30-31, when the board will issue fresh quarterly growth and price forecasts.
Companies’ outlook on wages and prices were mixed. Some firms hinted at cutting bonuses if US tariffs hurt profit, whereas others saw the need to keep hiking wages to retain talent, the summary showed.
While many firms expected to keep hiking prices to pass on rising input and labour costs, some held back price increases as consumers became more thrifty, the summary showed.
The BOJ ended a decade-long stimulus programme last year and in January raised its policy interest rate to 0.5 per cent on the view that inflation was on the cusp of durably meeting its 2 per cent target.
It cut its growth forecasts at its previous meeting on May 1 and signalled a pause in rate hikes after Trump raised the prospect of higher tariffs.
The central bank has said wages must keep rising and help achieve sustained inflation before it can resume rate hikes. REUTERS
