In light of ongoing US tariff pressures, the Bank of Japan held its key interest rate steady at 0.5 percent on Thursday, following a two-day policy meeting.

The central bank of Japan also revised its economic outlook, lowering its forecasts for real GDP growth. The updated projections show growth of 0.5 percent for fiscal 2025 and 0.7 percent for fiscal 2026, down from the previous estimates of 1.1 percent and 1.0 percent, respectively. For fiscal 2027, the BOJ anticipates a modest recovery, with growth reaching 1.0 percent.

Inflation expectations were similarly adjusted downward. Core inflation is now projected to reach 2.2 percent in fiscal 2025, down from 2.4 percent, and 1.7 percent in fiscal 2026, compared to the earlier forecast of 2.0 percent. The BOJ aims to achieve a stable 2 percent inflation rate over the long term.

At a news conference on Thursday, BOJ Governor Kazuo Ueda explained the reasons behind the downward revision to the country's economic and price outlook.

"Currently, both the economy and prices are generally on track," Ueda said. "However, the US tariff policy, which we had been concerned about, took a significantly negative turn as of April 2. Although there has been some reversal since then, the situation remains unclear".

He noted that the BOJ's latest outlook assumes some progress in trade negotiations. Nevertheless, the projections are based on the premise that a non-negligible level of tariffs will remain in place, which contributed to the downward revision.

Commenting more broadly on the economic outlook, Ueda said: "Trade policies adopted by various countries are slowing the global economy, which is placing downward pressure on the earnings of domestic companies. While accommodative financial conditions will offer some support, overall economic growth is expected to decelerate".

He emphasized the heightened uncertainty surrounding the future direction of trade policies in various countries and their potential impact on global economic and price trends.

"Since the United States announced reciprocal tariffs, uncertainty over global trade policies has remained extremely high," Ueda said. "There are diverse views on how the situation might unfold. In compiling this outlook report, we have assumed that negotiations among countries will make some progress and that major disruptions to global supply chains will be avoided."

The outlook report warned that a weakening global economy is likely to lead to a decline in exports and production, along with a drop in corporate profits. Business investment is also expected to slow amid the broader international downturn.

The report highlighted that broad-based tariff measures, in particular, are expected to disrupt global trade flows. Additionally, growing policy uncertainty — especially surrounding tariffs — could severely dampen business and consumer confidence and weigh on the outlook for global financial and capital markets.

A survey by the Development Bank of Japan revealed that 20 percent of companies based in Japan believe the Trump administration's tariff policies could impact their operations. The survey gathered responses from 227 firms across various industries, including automotive, transportation, and machinery.

Among automotive companies, 39 percent indicated potential effects from the tariffs. Some noted that a significant portion of their exports to the United States are manufactured in Japan and Mexico, making it challenging to shift production bases or restructure supply chains.

Contact the writers at jiangxueqing@chinadaily.com.cn.