BOJ keeps interest rates steady as Trump risks loom

The Bank of Japan kept interest rates unchanged on Wednesday, as policymakers chose to spend more time gauging how prospects of higher United States’ tariffs would affect the export-reliant economy.

The widely expected decision came as fears of a global slowdown caused by US President Donald Trump's tariff policy overshadow wage and price data showing Japan making progress in durably achieving the BOJ's 2 percent inflation target.

Markets are focusing on Governor Kazuo Ueda's post-meeting briefing for clues on how soon the bank could next raise rates, a decision complicated by the contrast between benign domestic data and uncertainty caused by Trump's trade policy.

Having just raised interest rates in January, the board voted unanimously to maintain the bank's short-term policy rate at 0.5 percent at a two-day meeting that ended on Wednesday.

The BOJ's meeting came hours before that of the US Federal Reserve, which is also expected to keep interest rates steady to watch how Trump's planned April tariff hikes unfold.

"Japan's economy is recovering moderately, albeit with some weak signs," the BOJ said in a statement announcing the rate decision, signaling its confidence that rising wages will underpin consumption and the broader economy.

Rising rice prices and the fading effect of subsidies aimed at curbing fuel costs will likely put upward pressure on core consumer inflation through fiscal 2025, the statement said on Japan's price outlook.

"Japan's economic and price outlook remains highly uncertain," due in part to risks surrounding the fallout from trade policies of each country, the statement said.

Big Japanese firms last week offered bumper pay hikes in wage talks with unions for a third straight year, backing the BOJ's view that sustained wage gains will keep inflation durably around its 2 percent target.

REUTERS