Masu: Japan's economy resilient, inflation drivers persist

Bank of Japan Policy Board Member Masu Kazuyuki noted that Japan's economy has demonstrated resilience despite global challenges, particularly the U.S. tariff policy implemented since spring 2025.

Initially, there were concerns about a decline in Japanese product sales in the U.S. and a potential global economic slowdown.

However, Masu highlighted that U.S. consumption and employment remained solid, and the tariffs were largely passed on to U.S. consumers without significantly reducing the trade deficit or causing feared inflation or economic deceleration in the U.S. For Japan, the impact was minimal, with the Bank's Tankan survey showing business conditions at a 35-year high of positive 18 across all industries.

Overall consumption in Japan has also shown gradual improvement, suggesting the issue is winding down without major economic disruption for Japan.

Board Member Masu highlighted the Iran situation as a major international event, posing risks to global energy supply.

He noted that while Japan's LNG supply is largely secured, prices are set to rise due to their linkage with Middle Eastern crude oil.

Japan's crude oil imports are heavily reliant on the Middle East, with over 70 percent passing through the Strait of Hormuz, raising concerns about potential shortages of fuels and chemicals.

Domestically, Masu identified persistent cost-push inflation drivers, including labor shortages and rising distribution costs, which have increased by around 3 percent.

These factors, combined with yen depreciation, are currently underpinning inflation in Japan, despite recent temporary declines in the overall CPI.