MNI BRIEF: BOJ Warns Of Drop In Corp Profts; Impact On Wages

The Bank of Japan warned on Friday that corporate profits are increasingly likely to decline in fiscal 2025 due to the direct and indirect effects of U.S. tariff hikes, according to the full text of its Outlook Report.

In the June 2025 Tankan survey, while nonmanufacturing firms’ forecasts for current profits in fiscal 2025 remained resilient, manufacturers – particularly in the processing sector – projected a decline in earnings, the report said.

“If such forecasts are realised, firms' wage-setting behaviour could also be affected, including bonuses and base pay increases; it is therefore necessary to pay close attention to future developments,” the report cautioned. “In the Bank's baseline scenario in this Outlook Report, the increase in food prices is projected to subside through the second half of fiscal 2025. As food items are frequently purchased by consumers, it is necessary to continue paying attention to the effects of developments in food prices on households' sentiment, inflation expectations, and private consumption." 

The BOJ board decided to hold the policy rate steady at 0.5% on Thursday. (See MNI BOJ WATCH: Ueda Says To Gradually Raise Rates)