Awaiting Fed, Bank of Japan holds rates and warns of current "great uncertainty"

On Wednesday, the Bank of Japan (BDJ) held its key interest rate at 0.5%, a widely expected move given the global economic uncertainty brought on by the tariff war initiated by Donald Trump and to overall geopolitical tensions.

In a statement signed by the board of directors, the JDB explained that the "unanimous" decision was made after noting that "the Japanese economy has recovered moderately, although some weakness has been observed in part" and that "overseas economies have grown moderately overall."

They further noted that their economic forecasts indicate that it appears "likely that the Japanese economy will continue to grow at a pace above its potential growth rate, with the overseas economies continuing to grow moderately and the virtuous cycle from income to spending gradually intensifying, under factors such as accommodative policy."

"Great uncertainty"

However, the JDB warned of "great uncertainty" about global trade and prices triggered by the trade war ignited by tariffs imposed by the Trump Administration and the aftershock from the world's major economies.

The BOJ raised interest rates in January to their highest level in 17 years in response to strong inflation in the world's fourth-largest economy. Last week, the head of the BOJ, Kazuo Ueda, signaled in the Japanese parliament his concern about "uncertainty in external economic and price trends."

Stephen Innes, an analyst at SPI Asset Management, argued to AFP that the U.S. Federal Reserve and the Bank of England could also keep interest rates unchanged this week as they "take the pulse of the impact of Trump's trade policies."