The Bank of Japan is considering maintaining a gradual tightening stance, while the impact of US tariff policies is still being observed.

According to informed sources, despite the uncertainty brought about by US tariff policies, Bank of Japan officials believe that there is currently no need to adjust the existing gradual interest rate hike policy. The sources stated that Bank of Japan officials believe that the tariff policies of the Trump administration and retaliatory measures by other countries may weaken the Japanese economy or delay the central bank's process of achieving its inflation target. However, they added that while waiting for more data to assess the impact of tariffs, officials are keeping their overall economic outlook forecasts largely unchanged. Several sources pointed out that given the multiple possibilities in economic trends, officials believe that it is too early to include them in the baseline scenario and make significant adjustments to policy stance now. It is reported that at the two-day policy meeting that ended on May 1st, officials will make the final decision on policy rates based on all the data available at that time. Sources revealed that although the Bank of Japan will present baseline scenario forecasts, it is likely to clearly state that due to the uncertainty of tariff policies, the economic outlook remains unclear. Faced with multiple risks in the economy and inflation, informed sources stated that the central bank is studying contingency plans for extreme situations. According to reports, the central bank is likely to lower its price expectations in the quarterly economic report to be released after this policy meeting. The adjustment is mainly due to factors such as a stronger yen, falling oil prices, and the possibility of economic slowdown. Sources stated that the Bank of Japan's first core inflation forecast for the 2027 fiscal year may be maintained at around 2%. Since the Bank of Japan released its outlook report in January, the yen has strengthened by about 11% against the dollar, and as of this Monday, oil prices have fallen by about 13%. Economists point out that the government's decision to make high school education free starting this fiscal year may cause the price index to drop by about 0.2 percentage points. Regarding the timetable for achieving the inflation target, the central bank previously stated that it expects to reach the target in the second half of the three-year forecast period ending in March 2027. As usual, the central bank will extend the forecast period by one year this time. Sources also revealed that officials may discuss lowering the economic growth forecast for this fiscal year from 1.1%. Barclays economists expect that due to the impact of tariffs, this figure may be significantly lowered to around 0.5%.