The recent imposition of new tariffs by President Donald Trump is expected to have an impact on Japan's economic growth, potentially leading to a delay in the Bank of Japan's planned interest rate hikes. The tariffs on auto imports and other Japanese goods could hamper economic growth by up to 0.8%, impacting the export-oriented economy.

The Bank of Japan had been counting on major exporters using overseas profits to boost domestic wages, thereby stimulating price and wage increases needed for future interest rate hikes. However, in light of fears of a global recession and the potential economic repercussions of the tariffs, the BOJ may revise downwards its economic growth forecasts and postpone any interest rate adjustments at its upcoming meeting in May.

Despite the short-term challenges posed by the tariffs, there is uncertainty surrounding how long the BOJ can hold off on rate hikes due to increasing inflationary pressures within Japan. While the next rate hike may be delayed, there are discussions about potential rate adjustments in the following months to balance economic risks and inflationary pressures. Deputy Governor Shinichi Uchida emphasized that the BOJ will closely monitor economic developments and risks while considering future rate movements.

Inflation in Japan has surpassed the BOJ's 2% target for almost three years, partly due to a weakened yen that raised import costs. This contrasts sharply with Japan's long struggle with deflation, which kept rates close to zero for many years. While the BOJ has raised rates under Governor Kazuo Ueda, Japan's borrowing costs remain significantly lower compared to the U.S. and Europe.

The BOJ faces the challenge of navigating between economic uncertainties stemming from the tariffs and domestic inflationary pressures. Despite concerns over rising food prices and external factors such as the Trump administration's policies, some board members stress the importance of addressing inflation decisively.