Core Viewpoint - The uncertainty surrounding tariffs and risks to economic growth are likely to keep the Bank of Japan from making any immediate policy changes [1] Economic Outlook - Ongoing lack of progress in US-Japan trade negotiations is casting a shadow over Japan's economic outlook, complicating the path to policy normalization [1] - The latest economic forecasts are expected to be a focal point, with potential downward revisions to GDP growth due to risks faced by Japan's export-dependent economy [1] Inflation and Wage Growth - Rising potential inflationary pressures observed in recent months may pose an upside risk to the Bank of Japan's inflation outlook [1] - However, wage growth exceeding inflation could provide confidence for further tightening of monetary policy [1]

Group 1 - The Bank of Japan is expected to signal a pause in policy normalization due to increased global uncertainty from U.S. tariffs, while still retaining the option to gradually raise interest rates when the economic outlook becomes clearer [1][4] - A survey of 54 economists indicates that the Bank of Japan will likely maintain the benchmark interest rate at 0.5% during the upcoming policy meeting [1] - The central bank's quarterly economic outlook report will be closely monitored for insights on the duration of the policy pause, with expectations that core inflation will remain around 2% by the fiscal year 2027 [1][4] Group 2 - The uncertainty surrounding U.S. tariffs has led to a significant drop in expectations for a rate hike before September, from 89% to 45% in a recent survey [6] - Japan is facing severe tariff challenges, including a 25% tariff on key industries and a projected 0.5 percentage point reduction in economic growth due to these tariffs [7] - Despite the downward pressure on the economy from tariffs, Japan's inflation rate remains above the Bank of Japan's 2% target, with recent data showing inflation in the Tokyo area exceeding analyst expectations [8] Group 3 - Public dissatisfaction with rising living costs has led to a decline in Prime Minister's approval ratings, prompting government measures to lower fuel prices and restore utility subsidies [11] - The consumer confidence index in Japan fell to its lowest level in two years, while long-term inflation expectations among households and businesses are on the rise [11] - The Bank of Japan is caught in a dilemma between high inflation and potential economic slowdown, making it crucial to maintain a cautious approach to interest rate hikes [11]