BOJ Maintains Steady Rate Hikes Despite Election Setback, Economic Risks

Bank of Japan Deputy Governor Shinichi Uchida indicated a cautious approach to interest rate hikes due to significant uncertainties in trade policy, especially following President Donald Trump's announcement of a trade deal with Japan. While the BOJ remains prepared to continue raising rates if economic conditions improve, Uchida emphasized the need to carefully balance risks amid unclear trade impacts and global economic conditions. Despite recent election setbacks for Prime Minister Shigeru Ishiba and inflation challenges in Japan, BOJ officials see little reason to alter their gradual rate-hiking policy, although they are closely monitoring government fiscal measures. The policy stance reflects concerns over downside risks to economic activity and prices, with the BOJ expected to issue updated growth and inflation projections soon. In contrast, the Bank of Israel, as noted by Governor Amir Yaron, is maintaining a cautious stance on interest rate cuts due to persistent inflation, particularly in rents, highlighting global central banks' focus on price stability amid economic uncertainties. Overall, both Japan and Israel illustrate central banks' careful balancing acts in managing inflation and economic growth amid ongoing geopolitical and trade uncertainties.