Glam Fusion

BOJ Warns of Food Price-Driven Inflation; U.S. Tariffs Could Severely Hurt Japan's GDP

July 10, 2025, 2:53 pm EDT

Economic News| BUSINESS , Economy , Financial Trade

BOJ Warns of Food Price-Driven Inflation; U.S. Tariffs Could Severely Hurt Japan's GDP

Bank of Japan board member Junko Kotani warned on July 9 that surging prices of rice and other foodstuffs are intensifying inflationary pressures, urging vigilance against "second-round effects" that might lift household inflation expectations. Japan’s consumer inflation remains around 3%, but the BOJ’s weighted median inflation gauge—closely watched by policymakers—still lags below the 2% target. Kotani noted economic uncertainty makes it premature to pinpoint the next rate hike, with food prices a critical variable.

A July 8 estimate by Daiwa Institute of Research painted a grim tariff impact: a 25% U.S. reciprocal tariff could shrink Japan’s 2025 real GDP by 0.8%, widening to 1.9% by 2029. Adding auto-specific tariffs and spillover effects from U.S.-China duties could deepen losses to 1.3% in 2025 and 3.7% in 2029. This aligns with World Bank and OECD downgrades, which cut Japan’s 2025 growth forecast to 0.7% in June.

 

Japan faces a structural bind: imported inflation limits monetary easing room, while trade protectionism risks stagnation. The dual pressures—stubborn price rises and tariff threats—complicate the BOJ’s policy path as it balances stimulus needs with stability.

Popular

More