Former Bank of Japan Governor Kuroda suggested a calm approach to Trump’s tariffs, advising that Japan should “sit down and respond” to U.S. policy changes. He critiqued the tariffs, suggesting they could escalate inflation to 4–5% by early autumn, negatively impacting U.S. consumption and growth.

Kuroda pointed out that U.S. policy uncertainty is already deterring U.S. business investment, which could affect long-term U.S. growth. He mentioned that Japan might gain from shifts in demand toward Japanese exports if U.S.-China tariffs persist. Kuroda dismissed any current talks of a second Plaza Accord and weakening the dollar, in spite of market unpredictability.

Bank of Japan Policy and Global Uncertainties

Regarding Bank of Japan policy, Kuroda supported Governor Ueda’s moves toward normalisation, considering the shift away from deflation as “appropriate”. However, he warned that potential rate hikes might be delayed due to global uncertainties.

Kuroda’s remarks serve as a calculated reminder that measured responses can often yield more durable outcomes than abrupt ones. His take on tariffs, particularly those introduced by the former U.S. administration, implies that while they are branded as necessary for domestic protection, they may carry heavier downstream effects. According to him, a rise in inflation to anywhere between four and five percent could tighten household budgets and reduce purchasing power, all while making it more expensive for businesses to borrow and invest. In that context, consumption slows down, expansion weakens, and uncertainty seeps deeper into markets.

By referencing a slowdown in U.S. business investment, Kuroda subtly points to hesitation in boardrooms that weigh future returns against a backdrop of inconsistent signals. This hesitation is not small—it could weigh on productivity gains and soften hiring plans. Over time, rather than driving innovation, firms may wait. This kind of pause adds pressure to monetary policymakers and clouds forward guidance.

We understand that shifting trade routes and supply chains may offer opportunities—morally neutral but economically advantageous for some exporters. If tariffs remain between two large economies, then others can find space to meet demand gaps. He implies Japan could benefit through redirected trade flows, benefiting from the dislocation rather than being caught directly in the policy shifts. However, we should be cautious not to see this silver lining as free upside. With each tariff decision, there are consequences that eventually interact with currency markets and capital allocation.

Monetary Policy Decisions and Global Dependencies

On the matter of monetary policy, Kuroda’s support for Ueda’s steps shows continuity but also invites patience. He sees the normalisation process as justified following decades of below-target inflation. The exit from persistent deflation has taken long years of stimulus and communication, so abrupt course changes would not be welcome. Still, he is mindful of external variables.

We interpret his caution over rate increases as a reflection of how exposed Japan’s monetary plans still are to what happens abroad. Global supply chains, energy prices, and investment flows could delay domestic decisions. The idea isn’t that a rate hike is off the table—but rather, that its timing cannot be assumed based on domestic indicators alone.

In the weeks ahead, it will be essential to monitor inflation prints in the U.S. and Japan closely. Policymakers are watching services, wages, and underlying price pressures. Any pickup in volatility might not come from expected sources.

Strategic engagement should follow economic signals, not political headlines. Option structures might lean toward longer expiries in response to uncertainty around rate paths or trade tensions. Any hedging related to dollar-yen should consider historical responses to trade disruption, not hypothetical accords.

Kuroda has made it clear: don’t expect coordinated currency agreements. Those looking for policy symmetry should instead focus on fiscal-monetary divergence and capital movement trends.

We’re reminded that every pricing decision is, in part, a judgement on stability.

Create your live VT Markets account and start trading now.