BOJ’s Ueda keeps rate-hike pledge but warns of US tariff impact

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By Leika Kihara

WASHINGTON (Reuters) -Bank of Japan Governor Kazuo Ueda said on Thursday the central bank will continue to raise interest rates if underlying inflation converges toward its 2% inflation target as projected.

But he said the central bank will scrutinise how various information, including on the potential economic fallout from higher U.S. tariffs, could affect the likelihood of durably achieving its price goal – a prerequisite for further interest rate hikes.

Tariffs affect the economy through various channels such as by weighing on trade activity, cooling business sentiment and heightening market volatility, Ueda told a news conference after attending the Group of 20 finance leaders’ gathering held during the International Monetary Fund and World Bank Group meetings in Washington.

“Having exchanged views with policymakers from other countries, I felt that many of them roughly had the same view” on the way tariffs affect their economies, he said.

Ueda said he will take into account the findings from his dialogue with global policymakers in constructing the BOJ’s assessment on Japan’s economy, and setting monetary policy.

“We will continue to raise interest rates if underlying inflation gradually converges toward our 2% target, as we project,” Ueda said.

“But we would like to scrutinise various data that comes in, without pre-conception” in setting monetary policy, he said.

Ueda’s comments preceded the BOJ’s policy meeting next week, when the central bank is expected to keep interest rates steady at 0.5% and downgrade its growth forecasts.

The BOJ, which ended a decade-long massive stimulus programme last year, raised its short-term interest rate to 0.5% in January in the belief the economy was on the cusp of sustainably achieving the central bank’s 2% inflation target.

While Ueda has signaled the BOJ’s readiness to keep raising rates, U.S. President Donald Trump’s tariffs have complicated the decision on when and how far it can hike.

The BOJ is likely to push back the timing of additional rate hikes as uncertainty triggered by U.S. tariffs has exacerbated downside risks to growth and inflation, a senior International Monetary Fund official said on Wednesday.

In its World Economic Outlook, the IMF said it expects Japan’s economy to expand 0.6% in 2025, down half a percentage point from its previous forecast in January, due largely to the hit from U.S. tariffs.

(Reporting by Leika Kihara;Editing by Dan Burns)