The new tariffs put in place by the U.S. government are causing the central banks in Singapore and Japan to change their strategies and policies in order to get ready for the effects on the economies.

The European Union’s ministers are meeting to talk about and give a unified response. At the same time, countries like Taiwan, India, and Vietnam have said they are ready to negotiate to avoid the tariffs.

Japan and Singapore’s central banks are also getting ready for the effects and are thinking about changing their policies and plans.

There is guarded optimism at the Bank of Japan

Shigeru Ishiba, the prime minister of Japan, said he would try to get the U.S. to lower the duties on Japanese goods. He did say, though, that it would take time for his ways to work.

A lot of people at the BOJ, like Kazuhiro Masaki, the manager of the Osaka branch and the former head of the group that wrote monetary policy, have said that they don’t know what will happen with the tariffs and that they could do a lot of damage to businesses and the economy. Masaki also said that businesses in western Japan were already thinking of ways to deal with risks that could go badly.

It’s different from other shocks because it’s caused by policies. So, it’s hard to figure out what might happen based on what has happened in the past, he said at a news conference. “The effect could happen in many ways, such as through trade and market changes.”

Reuters says that the BOJ’s assessment of regional economies, which is based on polls of firms across the country, did not fully take into account the effects of Trump’s announcement last week of reciprocal tariffs.

After the tariffs were announced on Monday, Asian stock markets crashed because investors were afraid that they would cause prices to rise, demand to drop, and the global economy to enter a slump.

The BOJ’s view on regional economies will be one of the things it looks at at its next policy meeting, which will take place from April 30 to May 1.

Even with these problems with the economy, the BOJ is still cautiously hopeful. The bank said that strong consumer spending, which would be driven by the country’s strong tourism industry and high-end goods, would lead to more wage rises and more solid plans for capital spending.

The central bank of Singapore may loosen its rules again

The Monetary Authority of Singapore (MAS) is likely to loosen its monetary policy even more when it meets on April 14, 2025, to review things. More and more people are worried about how the new U.S. taxes will affect trade around the world, which is why the policy might be loosened.

A poll by Reuters found that nine out of ten experts think the MAS will lower the slope of the S$NEER’s trading band. The MAS sets policy through the Singapore dollar nominal effective exchange rate (S$NEER).

In January 2025, it changed its rules for the first time in almost five years. That policy choice was mostly based on two things: core inflation was falling faster than expected in the country, and economic growth was also expected to slow down. ​

The average rate of core inflation in Singapore was 1.8% in December 2024, the lowest number since November 2021. This does not include the cost of housing or private transportation. The MAS changed its core inflation prediction for 2025 from a range of 1.5% to 2.5% to 1% to 2% because of the low average. ​

The MAS also predicted that Singapore’s growth would slow down. They said that GDP growth would be between 1% and 3% in 2025, which is less than the 4.4% growth they thought it would be in 2024.

This might be eased even more because of U.S. trade practices. Analysts, such as Lee Yen Nee from Fitch Solutions, have said that the new U.S. tariffs could slow Singapore’s growth by about 1%. This would raise the risk of a global slowdown, which would have a big effect on the economy’s reliance on trade.

“The latest U.S. tariff announcement makes a global recession more likely,” Lee said. “This would be very bad for Singapore’s economy because it depends so much on trade.”

At the moment, Singapore’s GDP is expected to grow by 1% to 3% in 2025. Now, Maybank has changed its prediction for GDP growth to 2.1%, and HSBC thinks it will slow down because inflation is low. In February, it dropped to 0.6%.

Barnabas Gan, an economist at RHB, is different from the other people Reuters asked. He doesn’t think the policy will change right away. He thinks that the policy will stay the same because the economy is growing steadily and there is a chance that tariff risks will go down.

He said that Singapore’s 10% U.S. tax rate is the lowest in Southeast Asia and should be taken into account. He did say that the rules might become less strict in the second half of the year.