By Megumi Fujikawa

U.S. trade policy will be a key factor in deciding Japan's monetary policy path, Bank of Japan Gov. Kazuo Ueda said as talks between Tokyo and Washington get underway.

"I understand that the U.S. is hoping to get the deal done within 90 days," Ryosei Akazawa, Japan's top trade negotiator, told reporters after a meeting with U.S. President Trump in the Oval Office,

However, Akazawa said he is unsure how quickly discussions will progress.

The fickle nature of the Trump Administration's rollout of tariffs on trading partners like Japan presents a curve ball for policymakers, who will be watching the progress of talks between Japan and the U.S.

Akazawa said Trump spoke frankly about U.S. tariff measures, and that negotiations with Japan are a top priority. The two countries agreed to hold another talk by the end of this month and reach conclusions as soon as possible, the minister added.

He didn't disclose details of the measures discussed.

Japan is seeking an exemption from the sweeping U.S. tariffs that threaten to destabilize hard-won improvements in the domestic economy. Amid uncertainty over how talks will pan out and what tariffs could materialize next, markets have started to price in lower odds of a rate hike by the central bank.

Many economists had expected the BOJ to raise interest rates to 0.75% in the summer but overnight index swap rates ​show a roughly 15% chance of a hike in June or July, according to brokers Totan Research and Totan ICAP.

Speaking at a parliamentary committee hearing on Thursday, BOJ chief Ueda reiterated the key factors that will shape the central bank's next decision.

"There are roughly two points--first, to collect and analyze information on overseas policy moves, especially those by the new U.S. administration, and to check how domestic wages and prices are moving, in what direction and by what forces," he said.

U.S. tariffs will not just hurt Japan's exports, they could also damage confidence among companies and households, and weigh on financial markets, the central bank governor said.

Trump paused so-called reciprocal tariffs on all trading partners except China for 90 days, but has maintained a baseline tariff of 10%. Industry-specific tariffs, including a 25% levy on foreign-made cars, are also in the mix.

Akazawa said he has asked the U.S. to review all of its tariffs, including those on cars, steel and aluminum, and reciprocal duties.

Write to Megumi Fujikawa at megumi.fujikawa@wsj.com

(END) Dow Jones Newswires

April 17, 2025 03:27 ET (07:27 GMT)

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