Japan’s central bank on Wednesday kept its key policy rate steady at 0.5% in a unanimous vote, as the export-reliant country assesses the potential impact of U.S. President Donald Trump’s protectionist trade policies on its economy.

The move, which was in line with market expectations, comes ahead of the U.S. Federal Reserve’s policy meeting, where the central bank is expected to keep its benchmark interest rate steady.

“Japan’s economy has recovered moderately, although some weakness has been seen in part,” BOJ policymakers said in a statement, while cautioning of “high uncertainties surrounding Japan’s economic activity and prices, including the evolving situation regarding trade … and domestic firms’ wage -and price-setting behavior.”

The bank is seen to be referring to reciprocal tariffs and sector-specific tariffs that Trump is expected to announce on April 2., said Hiroki Shimazu, chief strategist at MCP Asset Management Japan.

Following the rate decision, the Japanese yen was little moved, trading at 149.46 against the U.S. dollar. The benchmark Nikkei 225 index was up 0.69%.

Analysts are of the view that the BOJ will soon raise interest rates, but are split on the timing for the next hike.

Fred Neumann, chief Asia economist at HSBC, said the BOJ could next raise interest rates in June.

“June looks more likely. The market is a little bit after that, probably July is sort of what the market is thinking right now. We think a little bit earlier in June,” Neumann told CNBC’s “Squawk Box Asia” on Wednesday.

“It’s not just contingent on the Fed. It’s actually contingent on the BOJ getting some evidence that really wage increases are percolating through the economy,” Neumann said.

“We only just had the major unions negotiate, we don’t know what the smaller unions are doing, we don’t know what small or medium-sized enterprises are doing, so the BOJ tends to wait until June to get all the evidence on wages and then they can pull the trigger,” he added.

The BOJ raised short-term rates to 0.5% from 0.25% in January, its highest level since 2008, after ending a massive stimulus program last year. The central bank has signaled its readiness to hike rates further if the economic growth and inflation moves in line with its projections.

BOJ Governor Kazuo Ueda said at a post-meeting news conference Wednesday that “it is hard to quantify the risk,” referring to Trump’s back-and-forth comments on tariff hikes, according to Reuters translation of his remarks in Japanese.

“We will scrutinize how the U.S. trade policy unfolds, how it affects the U.S. and global economies, and how that all impacts Japan’s economic and price outlook,” he added.

Trump has slapped tariffs targeting nations including Canada and Mexico, where Japanese carmakers have major manufacturing bases. In additional to reciprocal tariffs, Trump also touted tariffs of around 25% on imported automobiles.

Japan so far has not been able to get a tariff exemption from the Trump administration despite a seemingly positive meeting between the two nations’ leaders in February.

The BOJ has long reiterated that its goal is to see a “virtuous cycle” of rising prices and wages in Japan.

Japan’s largest labor union announced on Friday that it managed to secure an average 5.46% increase in wages from April — its largest increase in over three decades.

The Japanese Trade Union Confederation, or Rengo, which has around 7 million members, said that the first tabulation of the results covering 760 unions was 0.18 percentage points higher than last year’s increase of 5.28%.

Small to medium-sized businesses saw an average rate rise of 5.09%, up 0.67 percentage points from last year and the first time since 1992 that the wage hikes for such companies crossed the 5% mark.

UA Zensen, an umbrella group representing retail, restaurant and other industry unions, reportedly said 139 of its member unions received an average increase of 5.37% in monthly wages for full-time workers, slightly less than 2024’s record figure of 5.91%.

In January, Japan saw a 2-year high inflation rate of 4%, as well as household spending massively beating expectations in December, with a 2.7% rise year on year.

The December figure was the fastest that household spending had climbed since August 2022, and the first year-on-year rise since July 2024. Household spending subsequently slowed in January to a 0.8% rise.

“Inflation expectations have risen moderately,” the BOJ said in the Wednesday statement, adding that “rice prices are likely to be at high levels and the effects of the government’s measures pushing down inflation will dissipate” through fiscal year of 2025.

Revised fourth-quarter GDP figures released last week showed Japan’s economy grew 2.2% on an annualized basis, a slower pace than initially reported. The revised data also came in lower than economists’ median forecast.

— CNBC’s Sam Meredith contributed to this report.