BOJ’s Uchida warns of downside risks to economy on trade uncertainty

[KOCHI, Japan] Bank of Japan Deputy Governor Shinichi Uchida said on Wednesday that risks to economic activity and prices were skewed to the downside due to “extremely high” uncertainty over trade policy and its effect on domestic and overseas growth.

The BOJ will continue to raise its policy interest rate if the economy and prices move in line with its projections, Uchida said in a speech.

But Uchida said the central bank will scrutinise “without any preconceptions” whether its projections will materialise due to a lack of clarity on how US trade policy unfolds, and affects the global economy and markets.

If some progress is made in US President Donald Trump’s trade negotiations with other countries, Japanese companies will likely enjoy strong profits and continue hiking wages, he said.

“But if the negative impact of tariff policies turns out to be greater or more prolonged than expected, the wage-hike trend seen in the past few years could weaken,” Uchida said.

“The BOJ needs to adjust monetary policy to best balance upside and downside risks from the perspective of maintaining economic and price stability,” he added. REUTERS