According to analysts monitoring the Bank of Japan (BOJ), US President Donald Trump's newly announced auto tariffs have lowered the probability of the BOJ raising its benchmark interest rate during its upcoming board meeting on May 1. Atsushi Takeda from Itochu Research Institute mentioned that with the tariffs' potential economic impact, it is unlikely for the BOJ to complete a thorough assessment in time for the May meeting.

The tariffs, set at 25%, are expected to adversely affect Japan's auto industry, a significant economic sector with potential repercussions on other industries as well. Katsutoshi Inadome, a senior strategist at Sumitomo Mitsui Trust Asset Management, noted that imposing such tariffs could delay any early interest rate hikes by the Bank of Japan, possibly leading to a decrease in long-term interest rates to below 1.5%.

While economists in a recent Bloomberg survey anticipated a rate hike by the BOJ between June and July, some suggested May 1 as the earliest possible timing. Trump's announcement indicated that the new tariffs would take effect on April 2 for non-US-made cars, impacting a substantial portion of Japan's exports to the US.

The yen's response to the tariff increase is crucial, as its fluctuations directly influence import-driven inflation in Japan. The yen's recent increase following the announcement could impact the country's stance on trade and economy. Despite the negative impact on Japanese stocks, particularly major automakers like Toyota, Honda, and Nissan, there is uncertainty over the actual implementation and overall economic impact of the tariffs. Takeda believes that while the economy faces increased risks, Japanese automakers' competitive position in the US market may mitigate the potential blow, allowing the economy to maintain its gradual recovery trajectory.