Japan PM Warns US Auto Tariffs Pose 'Extremely Large Impact,' BOJ Signals Caution

Japanese Prime Minister Shigeru Ishiba issued a stark warning Friday that the U.S. government's plan to impose an additional 25% tariff on auto imports will have an "extremely large impact" on Japan's economy, a nation heavily reliant on vehicle exports for growth.

The warning comes after U.S. President Donald Trump announced Wednesday that the steep tariffs on imported passenger vehicles, light trucks, and key components like engines and transmissions would take effect on April 3, with no exemptions. Trump stated the move, which the White House estimates could raise $100 billion annually, is intended to spur domestic manufacturing and would be "permanent."

"We will think about the most effective means to make the United States understand that this will not be of benefit to it," Ishiba stated during a parliamentary session, adding that Japan remains ready to continue negotiations with Washington. Ishiba has previously stated Japan is considering "all options" in response.

The auto industry is a cornerstone of the Japanese economy, accounting for roughly 3% of GDP, employing over 5 million people (about 8% of the workforce), and involving a vast supply chain of around 60,000 companies, according to industry data. Japan exported 4.4 million vehicles last year, with about one-third destined for the United States, making it highly exposed to the new tariffs. Analysts estimate the tariffs could raise vehicle prices for U.S. consumers by $4,000 to $15,000 per car, depending on import content.

Concerns reverberated within Japan's central bank. A summary of opinions from the Bank of Japan's March policy meeting, released Friday, showed board members voicing significant concern about the negative repercussions of the U.S. tariffs. One member noted that the central bank "will need to be particularly cautious when considering the timing for raising the policy interest rate," given the potential economic damage. Another stated, "Downside risks to Japan's economy have increased," suggesting the current policy rate should be maintained for now.

The BOJ held its key short-term interest rate at 0.5% last week, explicitly citing heightened uncertainty over U.S. trade policy. However, at least one board member expressed ongoing inflation concerns, suggesting the BOJ "may face a situation where it should act decisively" despite a potentially dimmer economic outlook.

The U.S. tariffs have drawn widespread international criticism, including from Canada, the European Union, and Mexico, whose President noted that the US-Mexico-Canada trade agreement (USMCA) framework should preclude such tariffs. South Korea, another major auto exporter, also expressed deep concern. The move threatens to disrupt global supply chains relied upon even by U.S. automakers.