- BOJ keeps economic assessment steady for all 9 regions
- Some firms worried of US tariff impact on profits, BOJ says
- BOJ paints rosy view on domestic wage, inflation outlook
- Trump-induced uncertainty casts shadow over BOJ's rate-hike path
- Govt to compile extra budget to cushion blow, Kyodo says
TOKYO, April 7 (Reuters) - The Bank of Japan said uncertainty over Japan's economy was growing as some firms worried about the hit to profits from higher U.S. duties, a sign President Donald Trump's sweeping tariffs risked upending a moderate economic recovery.
In a quarterly meeting of its regional branch managers on Monday, the BOJ maintained its assessment for all nine areas to say they were either recovering or picking up moderately.
But it said in a statement that "uncertainty over Japan's economy was heightening," underscoring the BOJ's concern Trump's tariffs may threaten to derail a cycle of rising wages and prices - a key prerequisite for further interest rate hikes.
While the statement did not make direct mention of higher U.S. tariffs, it warned that "some firms voiced concern over the impact on output and profits" from U.S. trade uncertainty.
The BOJ's assessment of regional economies, which is based on surveys conducted by its nationwide branches on firms, did not fully incorporate the impact of Trump's reciprocal tariffs announced last week, a central bank official told a briefing.
BOJ Osaka branch manager Kazuhiro Masaki said Trump's reciprocal tariffs are likely to have a negative impact on corporate sentiment, adding that companies in western Japan were already brainstorming ways to cope with downside risks.
However, he emphasised that it was hard to quantify just yet how big the damage to Japanese firms and the economy could be.
"This shock is unlike any other shock in the past in that it is policy-driven. It's thus hard to examine the potential impact based on past experiences," Masaki told a news conference.
"The impact could come through many channels including through trade and market moves," said Masaki who, before assuming the current post, was head of the BOJ's division drafting monetary policy.
MARKET TURMOIL
Asian share markets tanked on Monday as investors feared that Trump's tariffs could lead to higher prices, weaker demand and tip the global economy into recession.
The BOJ's assessment of regional economies will be among factors that will be scrutinised at its next policy meeting on April 30-May 1, when the board is seen keeping interest rates steady at 0.5% and issuing fresh quarterly economic forecasts.
The BOJ painted an optimistic view on the economy, saying that brisk spending by overseas tourists and strong demand for luxury items have underpinned consumption. It also said firms maintained their robust capital expenditure plans.
Pay hikes were broadening for a wide range of sectors in regional areas, though some regions saw smaller firms voicing caution over further pay increases, the statement said.
"Companies continue to pass on rising import costs at a moderate pace," with some also considering or implementing price hikes to raise funds to pay for rising labour costs, it said.
But Trump's decision to slap a 25% levy on auto imports, and a reciprocal 24% tariff on other Japanese goods, will likely deal a huge blow to the export-heavy economy with analysts predicting the higher duties could knock up to 0.8 percentage point off economic growth.
Japan's government and ruling bloc are considering compiling an extra budget to address the impact of U.S. tariffs and prolonged inflation, Kyodo news agency reported on Monday.
Reporting by Leika Kihara; Editing by Tom Hogue & Shri Navaratnam
Source: Reuters