Japan’s central bank said in its latest outlook on Thursday that there are a range of downside risks to economic activity and prices.
The Bank of Japan said the trade policies recently announced by different countries are likely to push down the domestic and overseas economies through various channels.
It says the introduction of wide-ranging tariffs is expected to impact global trade activity. It adds that the heightened uncertainties are likely to have a large impact on business and household sentiment around the world, and on global financial and capital markets.
The bank says firms have been quite active in setting wages and prices, and this will likely to continue.
The BOJ says firms could focus more on cost-cutting if high uncertainties over trade and other policies are prolonged.
It points to the risk that moves by firms to reflect rising prices in wages could weaken.
The bank says it’s necessary to pay attention to developments in foreign exchange rates and import prices, including international commodity prices. It says it is important to monitor their impact on domestic prices.
AloJapan.com