BOJ Concerns About Trade Talks: Updated June 19, 2025.

Downside risks exceed upside risks for both economy, prices: BOJ head

Article source:  https://mainichi.jp/english/articles/20250617/p2g/00m/0bu/049000c

Ideas

The Bank of Japan, like most central banks, are very conservative and they don't make a move unless they think its in the best interest of their country.

Japan is entering uncharted territory, like other countries so they really don't know what to do  related to the tariff situation and how to overcome or compensate for it.

With relation to prices, US prices, Japanese companies might have to increases to compensate for the increased tariffs, but of course that might reduce demand for Japanese products in the US.

There are always going to be risks related to increasing interest rates, such as a decreases in the loans at banks, a decreases in credit card purchases, and the decreases of housing loans, not to mention companies not taking out loans for the whatever they need.

Trade policies might be the deciding factor for the Bank of Japan if they feel the US tariff situation is just too much for the Japanese economy.

Its really too early to see the full effect of the tariffs at this time, as maybe by the end of the summer there will be more data available about how the US tariffs have affected Japanese companies in Japan and in the US.

The Bank of Japan has usually been the largest purchaser of Japanese government bonds as a way to keep the economy moving but recently reduced their buying of bonds.

But at the Japanese economy is slowing down and the potential effects of the tariff situation is beginning to set in the BOJ might be increasing its bond buying again.

The BOJ buying Japanese government bonds increases the debt to GDP ratio in Japan which is one of the highest in the world, which means the Japanese government owns a lot of debt.

The US admin. doesn't seem to care about absolute advantage or anything related to the principles of international trade as they seem to be just throwing away 50 plus years of positive international trade ideas.

Japanese cars has been a significant growth engine for Japan and its been a solid growth engine in the US too related to the many Japanese car dealerships along all the related products for Japanese cars sold in the US.

There are going to be many jobs affected in the US as potentially higher prices might begin to decrease sales which means jobs in the US could be lost, not to mention all the jobs being affected in Japan too.

When there is a lot of uncertainty many companies don't know what to do so they wait and see which could put them at risk to a lot of different factors.

What is really unfortunate here is the US admin. is causing a lot of stress for many of its closest allies such as Mexico, Canada, Japan, South Korea, not to mention many or all of the countries in the EU.

Japan has been dealing with a lot of inflation since the pandemic as it looked like they were just beginning to move out it the inflation situation.

But with the Israel and Iran situation that could increase global oil prices which means again, higher oil prices for all in Japan.

Consumer sentiment in Japan is always a challenge as Japanese consumers just don't spend like they do in the US or even the EU, as they are more savers than spenders as they just don't spend enough to help the Japanese economy grow.

And when Japanese consumer sentiment is less than good or not not where it should be it makes the situation even worse.

The major challenge in Japan is Japanese consumers, Japanese households have had their income decrease for decades and now they are one of the lowest if not the lowest income producing country among advanced economies.

For example when all that Japanese consumers or Japanese households see is increased prices they and they hear about it constantly on the news they become very unhappy and their sentiment decreases and they only spend on the everyday basics that they need.

The rice situation in Japan is a significant collapse of the rice market in Japan as it should never have happened as some actors in the rice market have or are acting only in their best interest and not in the best interest of Japanese society or Japanese households.

Have a nice day!