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The Bank of Japan predicted growth of just 0.5 percent, cutting its previous forecast in half, and decided against another hike in interest rates.
Published April 30, 2025Updated May 1, 2025, 12:18 a.m. ET
The growing list of major economies warning of weaker growth because of U.S. tariffs has a new member.
The Bank of Japan said on Thursday that it expects the Japanese economy to grow 0.5 percent in the fiscal year that started on April 1. That is a sharp downgrade from the 1.1 percent the central bank had forecast in January.
Explaining the change, the Bank of Japan cited “trade and other policies” leading to a slowdown in overseas economies and a decline in domestic corporate profits. The outlook was released alongside an announcement that the central bank would keep interest rates unchanged at 0.5 percent.
President Trump’s tariff threats are weighing on economic prospects around the world. In April, the International Monetary Fund lowered its 2025 outlook for all Group of 7 nations, including Germany and Japan, the world’s third- and fourth-largest economies, due largely to U.S. tariffs.
In Japan, Mr. Trump’s new taxes on imports — including a 25 percent tariff on imported cars — are already weighing heavily on the economy. The country is also bracing for potentially higher across-the-board levies of 24 percent, which the prime minister has said would cause a national crisis if they were not negotiated lower.
While Japan has shifted much of its manufacturing base overseas in recent decades, it still exports a substantial number of products, such as cars, to the United States. Items produced by Japanese companies outside Japan and then shipped to the United States also face the threat of higher tariffs.
