Inflation overshoot will trump BoJ’s tariff concerns

The new US auto tariffs and the looming reciprocal tariffs due next week pose clear downside risks to Japan’s economic outlook. But policymakers at the Bank of Japan have signalled that those tariffs don’t condemn the Bank to inaction. With inflation set to overshoot the Board’s January forecasts by a wide margin, we expect the Bank to hike rates at its next meeting in May.

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