By Megumi Fujikawa

TOKYO--Anxiety over U.S. tariffs has been spreading across Japan, a central bank report shows, sending a worrying signal about the corporate outlook as trade uncertainty deepens.

At a branch managers' meeting held Thursday, the Bank of Japan's local heads said growing worries over higher U.S. tariffs have turned companies cautious about investment plans. Orders from the U.S. have also declined for some companies, a summary of the meeting showed.

While businesses have voiced concerns about the outlook, the actual impact of tariffs seems limited so far, the BOJ said.

"Not only direct exports to North America, but also the supply chain and the broader market, including Asia, could be affected in various ways. We will examine those aspects as well," Osaka branch manager Kazuhiro Masaki said at a news conference.

Osaka is home to many Japanese exporters, which have strong ties with not only the U.S. but also other Asian nations, including China.

The BOJ has said it will keep tightening monetary policy, but unpredictable U.S. trade policy effects could delay additional interest-rate increases despite inflationary pressure at home.

In the central bank's quarterly regional economic report, also released Thursday, there were examples of how the trade angst is affecting companies.

A machinery manufacturer in Osaka said it lowered its full-year production plan, as weaker investment from its U.S. clients dampened demand for its products.

Another machinery maker in Japan's northern prefecture said it plans to pass on tariff costs by raising prices on the products it sells in the U.S.

"Some of our U.S. clients have expressed reluctance, making price negotiations difficult," the company was quoted as saying.

Trade concerns intensified this week after President Trump said he will impose a 25% tariff on Japanese goods that will kick in Aug. 1. He also laid out plans for duties on copper, pharmaceuticals and other sectors.

The Japanese government, which has held several rounds of talks with Washington, has said it will continue to aim for a fair trade deal. While there has been little sign of progress toward a formal deal, Japan's top trade negotiator, Ryosei Akazawa, has said that discussions are ongoing.

In Thursday's report, the central bank maintained its assessment for all of the nation's nine regional economies, saying they are recovering, although the pace is uneven.

Though there are positive developments in the domestic economy, some economists say rising external risks are making it more likely that the BOJ will pause interest-rate hikes. Aside from the 25% country-level tariff for Japan, the economy is at risk from the U.S.'s sector-specific duties, especially on autos.

"It is possible that an increasing number of companies beyond the core auto industry will see their profits decline--a development which raises the risk of the virtuous cycle of wages and prices failing to function," said Norinchukin Research Institute economist Takeshi Minami.

The BOJ branch managers' meeting summary showed that some companies mentioned the possibility of lowering winter bonuses if their profits decline due to U.S. tariffs. But there were also some that said they plan to keep boosting pay to secure workers.

The central bank's policy board is scheduled to hold its next rate-setting meeting on July 30-31.

Write to Megumi Fujikawa at megumi.fujikawa@wsj.com

(END) Dow Jones Newswires

July 10, 2025 04:09 ET (08:09 GMT)

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