Tokyo – Kazuo Ueda, the government of the Bank of Japan, is struggling to understand that a man who lives seven thousand miles away is in charge of making the decision.
US President Donald Trump ‘s , business war , risks are distracting the whole world market like a low-grade but prolonged pain. The throbbing wasn’t enough to derail this Friday’s ( January 24 ) rate hike in Japan, one that had been in the works for weeks.
The BOJ increased its benchmark rate by a third point to 0.5 %, its highest levels since 2008. The japanese gained as much as 0.7 % to the money to 155.01 in early day trading. Despite increasing three days in less than a month, the BOJ also maintains the lowest benchmark rate in the world, tied with the Swiss National Bank.
However, Ueda’s glass to, as his staff put it,” continue to raise the plan interest rate and adjust the degree of financial hotel” depends on its assumptions about the outlook being ruled out.
It’s the same verbiage that the BOJ used when it last tightened in July. That, nevertheless, was again when Tokyo politicians thought Trump 2.0 may never materialize.
Then, all bets are down as Trump threatens to wreck , Asia’s 2025 , with a storm of taxes, charges that may surely bang Japan’s business.
For now, Trump is holding his flames on the 60 % income he , threatened , on Chinese products. No one is likely to be more amazed than Chinese leader Xi Jinping, whose country has been gearing up for Trump’s retaliation journey.
Trump is showing that his business war is still going by promising to establish 25 % taxes on American and Hispanic products on February 1.
Trump also seems to be firing a killed off Beijing’s spear. The concept, it seems, is that China can , prevent tariffs , if Xi’s Communist Party starts making great agreements.
As Trump told the audience in Davos this month:” All we want is justice. We simply want a level playing field. We don’t want to get benefits. We’ve been experiencing significant shortfalls with China. Joe Biden allowed it to “get out of hand.”
However, given that Trump is a Trump, Team Xi would need to win over Washington by promoting trade with China and the US to avoid tariffs, which some believe Xi would ever do.
Many investors are also worried about Trump’s imposing tariffs, which would likely stir the world’s largest trading country at the worst possible time.
The negative pressures that China carried into 2025 may get even worse if Trump’s policies walk a crucial development website: exports. Already, China ‘s , property crisis , and weak household demand have economists buzzing about a Japan-like “lost decade”.
It’s something , officials in Tokyo , know all too much about. Despite all the excitement over the BOJ’s decision to raise rates another step closer to zero, the benchmark’s previous peak of 0.5 %, 17 years ago, didn’t go so well.
Back then, Toshihiko , Fukui was in Ueda’s chair. Fukui’s board managed to end quantitative easing in 2006 and start announcing official rates for the first time since 1999, when the BOJ initially reduced them to zero.
In 2007, he tightened further. But the recession that followed enraged the political establishment. By 2008,  , Fukui’s successor was resurrecting QE and pushing rates back to zero.
It’s an open question whether Ueda can avoid Fukui’s fate. Trump is likely to offer the solution in some way or another. As Trump begins , tossing tariff after tariff , at the globe, Japan’s export-reliant economy will be at the very center of the collateral-damage zone.
These are just indirect risks, to be precise. If Prime Minister Shigeru Ishiba isn’t sufficiently subservient for Trump’s liking, Japan might face its own tariffs.
The 100 % taxes Trump plans for Mexico-made automobiles could easily come Japan’s way. Ishiba, for example, hasn’t even been able to secure a meeting with Trump, though , Trump , has made time for virtually every other world leader imaginable.
Japan could be in harm’s way even if Trump doesn’t slap huge taxes on China.  , Officially, Japanese lawmakers claim they’re ready to cooperate with the Trump 2.0 White House. In private, however, they worry Trump might strike a bilateral trade deal with Beijing that excludes Japan.
Either way, the , BOJ’s path forward , is a cloudy one.
” The outlook is subject to significant policy uncertainty at home and abroad — US President Trump’s promise of higher tariffs is bound to shake up global trade and supply chains”, says , Stefan Angrick, head Japan economist at , Moody’s Analytics.
Thing is, Japan has been here before. In 2008, the global financial crisis complicated the BOJ’s tightening plans. Today,  , US turbulence , may again be standing in the way of the BOJ normalizing 25 years of zero rates.
Whether or not Ueda understands the yen’s and Japanese rate movements better than Trump’s.
Follow William Pesek on X at @WilliamPesek