Capital Economics: Tariff uncertainty could delay the Bank of Japan's rate hike until 2026

Capital Economics said the continued lack of clarity on the tariff issue could delay the Bank of Japan's move to tighten monetary policy. The agency's baseline forecast remains that Tokyo will reach an agreement with Washington to avoid the threat of 25 per cent tariffs. If that happens soon and there is no increase in tariffs, or only a modest increase in tariffs, then the case for the Bank of Japan to raise rates in October will not be shaken. Inflation is now well above the Bank of Japan's May forecast, and the Japanese economy is doing reasonably well so far. But economist Marcel Thieliant said any delay in further negotiations or a significant increase in tariffs could persuade the central bank to delay rate hikes until next year. (Jin Ten)