Daiwa Securities estimates that Trump’s proposed 25% reciprocal tariffs on Japanese goods could reduce Japan’s real GDP by 1.1% cumulatively.
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Economists at the firm project real GDP growth of just 0.1%–0.2% for FY2025, a sharp slowdown from 0.8% growth in FY2024.
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While the tariffs may not trigger a major shock, ongoing labour shortages could sustain inflationary pressures.
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As a result, the Bank of Japan is likely to continue with its gradual interest rate hikes, rather than easing policy in response to slower growth.
Bank of Japan Governor Ueda
This article was written by Eamonn Sheridan at www.forexlive.com.