Hajime Takata: Economic activity, prices and monetary policy in Japan - Japan as a leading asset management center
Speech by Mr Hajime Takata, Member of the Policy Board of the Bank of Japan, at a meeting of the Chugoku Economic Federation, Hiroshima, 20 October 2025.
The views expressed in this speech are those of the speaker and not the view of the BIS.
Introduction
It is my pleasure to have the opportunity to address you today at the meeting of the Chugoku Economic Federation. I would like to take this chance to express my sincere gratitude for your support and cooperation with the activities of the Bank of Japan.
My remarks will focus on Japan's economic activity and prices, as well as the Bank's conduct of monetary policy.
I. Economic Activity and Prices
I will begin with developments in economic activity and prices.
Overseas economies have grown moderately on the whole, although some weakness has been seen in part, reflecting trade and other policies in each jurisdiction. In the October 2025 World Economic Outlook (WEO), the International Monetary Fund (IMF) revised upward its forecast for global growth from the April WEO, which had incorporated the significant impact of U.S. tariff policy, and from its subsequent July WEO Update (Chart 1). Let me take a look at developments in the U.S. economy, where the impact of tariff policy has been of concern. Although domestic demand in the United States was expected to decline due to price rises stemming from the impact of reciprocal tariffs imposed in April by the Trump administration, the actual impact of this has so far been limited. Specifically, although there has been a slowdown in U.S. employment, corporate profits for IT-related firms in particular have improved, and stock prices have risen to record high levels. Amid anxiety about the future, deep-rooted concerns over consumption and investment remain, but solid asset prices have continued to cause the impact of tariff policy on consumer sentiment to be limited. The Federal Reserve kept its policy interest rate unchanged from the January 2025 Federal Open Market Committee (FOMC) meeting. In light of the slowdown in employment, however, it once again cut the policy rate at the September FOMC meeting (Chart 2). Meanwhile, wages and employee income have been robust, and AI investment has also remained at a high level. As for the outlook, I am of the view that a sharp economic slowdown triggered by credit contraction, which was common during past economic downturns in the United States, is unlikely, in light of factors such as stable financial conditions and the sound balance sheets of households, firms, and financial institutions. Since the start of 2025, what might be called a "north wind" policy predominated in the United States -- i.e., a policy that, like the north wind in Aesop's fable, tends to favor pressure over persuasion, as represented by U.S. tariff policy in particular. Such a policy exerts a negative impact on economic growth. However, as seen in the passage of tax cut legislation in July, coupled with an expansion in investment spurred by deregulatory initiatives, the situation in the United States appears to be shifting to a "sun" policy, which prefers persuasion and exerts a positive impact on economic growth.