US Tariffs: The Global Economic Shocker
Unraveling the Global Impact of Protectionist Trade Policies
Lowered growth expectations by Bank of Japan due to tariffs
The trade war cleverly waged by the current US administration, placing hefty tariffs on trading partners and various imports like steel and automobiles, is causing ripples of uncertainty in the global economy.
The Bank of Japan (BOJ) recently acknowledged this doubt, revising its growth forecasts and maintaining steady interest rates in response to the escalating global economic uncertainty fueled by these tariffs.
BOJ Governor Kazuo Ueda expressed concerns, stating that accurately gauging the impact of these far-reaching tariffs and the opposing measures taken by affected nations would be challenging. He warned that the level of uncertainty would be significant even after the overall framework of the tariffs is established, due to the sheer scale of their implementation.
Here's a grainy snapshot of Ueda's concerns¾Bloomberg
Dragon from the East
Japan's economic expansion is projected to slow down, partly due to sluggish overseas economies and declining corporate profits, all thanks to trade and other policies that are slowing the pace of global growth. The BOJ has adjusted its expectations, revealing that it now expects Japan's GDP to rise by a mere 0.5% this fiscal year (beginning April 2022). For the following fiscal year, GDP growth is expected to grow modestly by 0.7%, though it was previously forecasted to increase by 1.0%.
While it's expected that factors such as accommodative financial conditions will continue to provide support for Japan's economy, a decline in consumer spending, limited business investment, and reduced exports could dampen the growth rate further.
The BOJ—Pulling the Right Strings
Although the BOJ held off on interest rate adjustments following a two-day policy meeting, it's no surprise. The BOJ's key rate remains significantly lower than those of the US Federal Reserve (4.25%-4.5%) and Bank of England (4.5%).
Economists at UBS Group AG predicted that market fragility, global economic uncertainties caused by US tariff/trade policies, and an unstable global economic outlook would lead the BOJ to hold off on increasing rates. On the other hand, Capital Economics Ltd analysts envisioned more interest rate hikes on the horizon for later in the year.
The Dance of Diplomacy—Between Japan and the US
In an attempt to alleviate the impact of tariffs on exports, Japanese tariff talks envoy Ryosei Akazawa and US representatives are locked in negotiations. While specific details on the outcome of these discussions are not yet disclosed, it's plausible that fruitful negotiations will help Japanese policymakers make informed decisions about increasing interest rates in the future.
Senior strategist Katsutoshi Inadome from Sumitomo Mitsui Trust Holdings Inc believes that constructive negotiations between Washington and Tokyo to mitigate the impacts of tariffs on exporters will serve the interests of Japanese policymakers who are considering raising interest rates.
- Kazuo Ueda, the Governor of the Bank of Japan (BOJ), has expressed concerns about estimating the impact of the US tariffs and the opposing measures taken by affected nations, stating that the level of uncertainty would be significant even after the overall framework of the tariffs is established.
- The Bank of Japan (BOJ) recently acknowledged the impact of US tariffs on the global economy, revising its growth forecasts and maintaining steady interest rates in response to the escalating global economic uncertainty fueled by these tariffs.
- Economists at UBS Group AG have predicted that market fragility, global economic uncertainties caused by US tariff/trade policies, and an unstable global economic outlook would lead the BOJ to hold off on increasing rates.
- In an attempt to alleviate the impact of tariffs on exports, Japanese tariff talks envoy Ryosei Akazawa and US representatives are in negotiations, and it's plausible that fruitful negotiations will help Japanese policymakers make informed decisions about increasing interest rates in the future.
