Japan's Sankei Shimbun reported on Wednesday (April 16) that Bank of Japan Governor Kazuo Ueda stated that if US tariffs harm the Japanese economy, the central bank may need to take policy action. He hinted at the possibility of suspending the interest rate hike cycle.

Ueda stated in an interview that since February, the risks surrounding US President Trump's policies have been "closer" to the worst-case scenario envisioned by the Bank of Japan. He added that recent developments have affected the confidence of businesses and families.

Ueda stated that if the progress of the economy and prices is consistent with the Bank of Japan's forecast, the Bank of Japan will continue to raise interest rates at an appropriate pace.

He said, "But we will carefully examine the extent to which US tariffs may harm the economy without preconceptions, and it may be necessary to take policy responses. We will make appropriate decisions based on changes in the situation

The next policy meeting of the Bank of Japan will be held from April 30th to May 1st, and the market generally expects interest rates to remain unchanged at that time. The central bank will also release new quarterly growth and price forecasts, which will provide clues to its monetary policy outlook.

Ueda said that the increase in tariffs by the United States is expected to harm Japanese exports and may affect household confidence by increasing uncertainty about the economic outlook.

He said, "Although the progress of the stock market and exchange rate is difficult to predict, we will carefully monitor their impact on the economy

Regarding the outlook for prices, Ueda stated that domestic food inflation may ease, while real wage growth is expected to turn positive and continue to rise from the middle of this year.

Ueda added that there are both upward and downward risks in the price outlook. The report quoted him as saying that although sustained food inflation or supply disruptions caused by US tariffs may push up prices beyond expectations, the rise in the cost of living may cool consumption and prevent further price increases.

Ueda stated that when preparing the new quarterly forecast to be released on May 1st, the Bank of Japan will not only refer to data, but also to surveys of companies.

The Bank of Japan ended a decade long large-scale stimulus plan last year and raised interest rates to 0.5% in January, believing that Japan is at a sustainable level of achieving its 2% inflation target.

Although Ueda hinted that the Bank of Japan is ready to continue raising interest rates, Trump's decision to increase US tariffs has complicated the Bank of Japan's decision on when and to what extent to raise still low interest rates. Most analysts still expect the Bank of Japan's next move to be a rate hike, not a rate cut.