BOJ Softens Near-Term Tariff Outlook Ahead of July Policy Review

The Bank of Japan plans to keep warning that uncertainty over the economic impact of the United States’ 145% tariff on Chinese goods remains high, but its forthcoming quarterly Outlook Report is expected to describe the near-term hit to Japan’s economy as less severe than feared three months ago, according to people familiar with the draft. Resilient output, capital spending and firm data from the United States and China have prompted the central bank to moderate its language even as it holds the short-term policy rate at 0.5% at the July 30-31 meeting. Growth projections are likely to stay at 0.5% for fiscal 2025, 0.7% for 2026 and 1.0% for 2027, while some policymakers are considering lifting the current fiscal-year inflation forecast amid persistent increases in food prices. Markets will parse the report’s tone for clues to the timing of the BOJ’s next rate hike.