BOJ to raise rates in Q3 though Trump tariffs will disrupt policy normalisation: Reuters poll (2025)

TOKYO : The Bank of Japan is likely to hold its key interest rate through June, showed a Reuters survey of economists, with a 25-basis-point hike next quarter expected by a slight majority of respondents rather than over two-thirds in a poll last month.

Nearly 90 per cent of respondents also said the risk of recession in Japan was low.

The responses reflect economists' view that U.S. President Donald Trump's vacillating tariff action has disrupted but not derailed the central bank's quest for slightly tighter monetary conditions - even as many peers cut borrowing costs to support economies and mitigate the impact of Trump's trade war.

In an April 14-21 poll, 84 per cent of economists, or 47 of 56, forecast no change to interest rates at the BOJ's next two policy meetings on April 30-May 1 and June 16-17.

Only 52 per cent of economists, 27 of 52, expect a hike in the bank's short-term interest rate to 0.75 per cent from 0.5 per cent in the July-September quarter, down from 70 per cent of respondents in March.

"The impact of Trump's tariffs has made the economic outlook extremely uncertain, and with (corporate) earnings expected to deteriorate particularly in the manufacturing sector, we expect the BOJ to delay its interest rate hike," said economist Tsukasa Koizumi at Hamagin Research Institute.

At the same time, the impact of tariffs is not significant enough to alter the BOJ's policy stance, said Daiwa Securities economist Kento Minami.

Markets have priced in a 65 per cent chance of the BOJ raising its short-term rate by 25 basis points by year-end.

Of 39 economists who predicted a hike in a specific month, 28 per cent, or 11, picked July versus 70 per cent who held that view in a poll last month. Another 23 per cent, or nine, said "2026 or later", up from zero in March. Eight economists picked September, five selected June and three did not expect a hike in the near future.

Trump this month imposed a 25 per cent tariff on car and truck imports to the U.S. and 24 per cent on all Japanese goods. He soon afterwards reduced the latter to a baseline 10 per cent for 90 days.

All but one of 32 poll respondents said U.S. tariff action has been negative for Japanese business sentiment.

The central bank is set to cut its economic growth forecast in its quarterly outlook report due for release at its next policy meeting, Reuters previously reported.

However, 29 of 30 economists did not see a necessity for the BOJ to lower borrowing costs, and 87 per cent - 26 of 30 - did not expect Japan to fall into a recession.

The BOJ is likely to signal in its outlook report that risk from higher U.S. tariffs will not derail a cycle of rising wages and accelerating inflation that is widely seen as necessary for interest rate hikes, sources told Reuters.

"Exports will decline, but the strong yen will reduce import costs and boost corporate earnings," said Atsushi Takeda, chief economist at Itochu Research Institute.

"And the suppression of consumer price increases is expected to support personal consumption, thereby an economic downturn is likely to be avoided."

(For other stories from the Reuters global economic poll)