On Wednesday morning, Bank of Japan (BoJ) Governor Kazuo Ueda shared his insights on the potential effects of US tariffs. According to Ueda, in the short term, US tariffs are likely to drive up inflation in the United States. However, over the long haul, they could put downward pressure on US prices by decelerating the country’s economic growth.
Key Statements from Ueda
Ueda pointed out that the scale of US tariff hikes matters significantly. Depending on how large these increases are, they can have a substantial impact on the trade activities of various countries. In the near term, the tariffs will likely push up US inflation. This is because when tariffs are imposed on imported goods, the cost of these goods for US consumers and businesses goes up, directly contributing to inflationary pressures.
Looking further ahead, though, Ueda warned that the tariffs could slow down the US economy. As a result of reduced trade due to the tariffs, economic growth may cool off. A slower – growing economy typically has less upward pressure on prices, leading to a potential long – term decrease in inflation.
Another crucial aspect Ueda highlighted was the impact of US tariffs on household and corporate sentiment. When assessing the overall effect of these tariffs on the global economy, understanding how they influence the confidence of consumers and businesses is essential. Their sentiment can, in turn, affect spending, investment, and hiring decisions, further shaping the economic landscape.
Ueda also mentioned that when finance leaders gather for the IMF/G20 meetings later this month, more information about US tariff policy is likely to emerge. This will provide an opportunity for policymakers to exchange views and discuss strategies to deal with the potential economic consequences.
Market Reaction
As of the time of reporting, the USD/JPY currency pair had experienced a 0.19% increase on the day, trading at 149.88. This movement in the currency pair reflects the market’s response to various factors, including Ueda’s comments and broader economic expectations.
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