On Thursday this week, Takako Masai, a former member of the Bank of Japan's Policy Board, warned that US President Trump's tariff policies were hitting Japanese exports, rapidly reducing the likelihood of further interest rate hikes in Japan or potentially marking the end of the current rate hike cycle for the Bank of Japan. The impact of Trump's tariffs may become apparent next year. Masai served on the Bank of Japan's Policy Board from 2016 to 2021. After completing her term, she has maintained close ties with current Bank of Japan officials. She said that the uncertainty surrounding US trade policies is causing significant disruptions to the global economy, which could hurt Japan's exports, output, wage growth, and consumption. She specifically mentioned that US automotive tariffs would be particularly damaging to Japan's economy, given the automotive industry's significant role in Japan's economy. Currently, Japan is still struggling to reach an agreement with the US in tariff negotiations. Just on Thursday, Japanese Prime Minister Shigeru Ishiba reiterated that Japan is not in a hurry to reach a trade agreement with the US. He said that while Japan welcomes progress in the ongoing tariff negotiations with the US, it will not sacrifice national interests for the sake of a quick deal. This stalemate has cast a shadow over the outlook for Japan's economy, which heavily relies on auto exports to the US. Masai predicted that "the real test for Japan's economy may come in 2026," as the impact of US tariffs will only start to be felt in six to 12 months, and "the Bank of Japan may be unable to raise interest rates for a considerable period." The Bank of Japan should not raise interest rates prematurely. Currently, many analysts believe that, depending on the progress of trade negotiations between the US and other countries, the Bank of Japan may delay further interest rate hikes this year, possibly until 2026. Last year, the Bank of Japan exited its years-long ultra-loose monetary policy cycle and raised interest rates to 0.5% in January this year, as it was believed that Japan was on the verge of consistently achieving its inflation target. Masai commented that she believed Kazuo Ueda's previous move to exit ultra-loose monetary policy was appropriate, but given the current threat of US tariffs to Japan's economy, interest rates should not be raised prematurely. Instead, the Bank of Japan may need to commit to keeping real interest rates low, to support the Japanese government and the private sector in restructuring Japan's economy. "If Japan's economy faces a severe shock and the Bank of Japan is forced to act, it may once again use all available tools," Masai said. "This is the essence of policymaking," even if it means that the Bank of Japan may expand its already massive balance sheet. Earlier this May, the Bank of Japan (BOJ) lowered its outlook for Japan's economic prospects, hinting that despite the steady rise in inflation in Japan, it might still delay raising interest rates under the pressure of uncertainty surrounding US trade policies. Takako Masai also mentioned that Japan's recent inflation has been primarily driven by rising domestic fuel and raw material costs. Given the continued sluggish global demand for fuel and raw materials, this upward trend in Japan is likely to ease in the future.

[Morning Meeting Minutes on May 19] Today, the SMM 1# refined nickel price was 124,900-127,350 yuan/mt, with an average price of 126,125 yuan/mt, a decrease of 200 yuan/mt from the previous trading day. The mainstream spot premiums quotation range for Jinchuan No.1 nickel was 2,000-2,200 yuan/mt, with an average premium of 2,100 yuan/mt, unchanged from the previous trading day. The premiums and discounts quotation range for Russian nickel was 0-300 yuan/mt, with an average premium of 150 yuan/mt, unchanged from the previous trading day.

The latest data shows that Japan's economy contracted more than expected in Q1 . As the impact of US President Trump's tariff policies becomes more pronounced, Japan's economy is expected to face even greater headwinds in the future . A report released by the Japanese government on Friday revealed that the country's economy contracted for the first time in a year in Q1 . The economy contracted by 0.2% QoQ, compared to market expectations of a 0.1% contraction . Real GDP contracted at an annualized rate of -0.7% in Q1, significantly worse than the median market forecast of -0.2% . GDP growth in the previous quarter was revised up to 2.4% . The decline in Japan's economy was attributed to stagnant private consumption and falling exports. Private consumption, which accounts for more than half of Japan's economic output, remained flat in Q1, compared to market expectations of a 0.1% increase. Japanese exports fell by 0.6% in the quarter, while imports rose by 2.9% . This suggests that Japan's economy had already lost support from overseas demand before Trump announced the full implementation of "reciprocal tariffs" on April 2 . This highlights the fragility of Japan's economic recovery and the challenges faced by monetary policy makers. The global trade war initiated by Trump has shaken financial markets and complicated the Bank of Japan's (BOJ) interest rate path . The BOJ ended a decade-long monetary easing policy last year and raised interest rates to 0.5% in January this year, indicating that it was prepared to further raise borrowing costs if a mild economic recovery enabled Japan to achieve its 2% inflation target over the long term . At its meeting on April 30 to May 1, the BOJ kept interest rates unchanged at 0.5% and significantly lowered its economic growth forecast. This suggests that uncertainties surrounding US tariffs and the threats facing Japan's economy may keep policy makers on the sidelines for some time .Impact of tariff policies gradually emerging The impact of Trump's tariff policies is expected to become more pronounced in the coming months . Trump imposed a 24% reciprocal tariff rate on Japan in early April, which was then suspended for 90 days until early July. However, Japan still faces a base tariff rate of 10% and a 25% auto tariff, which took effect on April 3 . This poses a significant threat to Japan's economy, which is highly dependent on exports, with automobiles being a key export category and a pillar industry of Japan's economy . Currently, there is still uncertainty over whether Japan will secure tariff exemptions in bilateral trade negotiations with the US. According to media reports citing sources, Akizawa Ryosei, Japan's chief trade negotiator and Minister for Economic Revitalization, may head to Washington as early as next week to hold the third round of trade negotiations with the US.

SMM Nickel News on May 16: Macro News: (1) Fed Chairman Powell: The US Fed is adjusting its overall policy-making framework, with zero interest rates no longer being a baseline scenario. There is a need to reconsider the wording regarding underemployment and the average inflation rate. It is expected that the April PCE will drop to 2.2%, which is a mild figure, but it may still not reflect the upcoming tariff-driven price increases. Powell stated that some of the Fed's practices are permanent, such as the focus on inflation expectations. Sound inflation expectations enable the Fed to provide follow-up support for employment deployment without jeopardizing inflation stability. (2) A report released by the Japanese government on Friday showed that the country's economy contracted for the first time in a year in Q1. The economy contracted by 0.2% QoQ, compared to market expectations of a 0.1% contraction. The actual GDP growth rate for Q1, when annualized, was -0.7%, far below the median market forecast of -0.2%. The revised GDP growth rate for the previous quarter was 2.4%. The decline in Japan's economy was attributed to stagnant private consumption and falling exports. Private consumption, which accounts for more than half of Japan's economic output, remained flat in Q1, while market expectations were for a 0.1% increase. Japanese exports fell by 0.6% in the quarter, while imports rose by 2.9%. Spot Market: Today, the SMM 1# refined nickel price is 124,900-127,350 yuan/mt, with an average price of 126,125 yuan/mt, down 200 yuan/mt from the previous trading day. The quotation range for the mainstream spot premiums of Jinchuan No.1 nickel is 2,000-2,200 yuan/mt, with an average premium of 2,100 yuan/mt, unchanged from the previous trading day. The quotation range for premiums and discounts of Russian nickel is 0-300 yuan/mt, with an average premium of 150 yuan/mt, unchanged from the previous trading day. Futures Market: The most-traded SHFE nickel contract (NI2506) maintained a fluctuating trend in the morning session, closing at 124,730 yuan/mt as of 11:30, down approximately 0.24%. Consensus has been reached on tariff issues in the China-US economic and trade talks, easing trade tensions. Currently, nickel ore prices remain high, and there is still a shortage of supply in mining areas, leading to increased costs in the nickel industry chain. However, under the supply surplus situation, cost transmission is hindered, and nickel prices may maintain a weak and fluctuating trend, with a support level at 122,000 yuan/mt and a resistance level at 128,000 yuan/mt. Subsequent attention should be paid to policy adjustments in Indonesia and changes in nickel ore supply after the end of the rainy season in the Philippines.

[Japan's Q1 Economy Contracts for First Time in a Year] A report released by the Japanese government on Friday showed that the country's economy contracted for the first time in a year in Q1. The economy contracted by 0.2% QoQ, while the market had expected a contraction of 0.1%. The real GDP growth rate, annualized, was -0.7% in Q1, far below the median market forecast of -0.2%. The revised GDP growth rate for the previous quarter was 2.4%. The decline in Japan's economy was attributed to stagnant private consumption and falling exports. Private consumption, which accounts for more than half of Japan's economic output, remained flat in Q1, while the market had expected a 0.1% increase. Japanese exports fell by 0.6% in the quarter, while imports rose by 2.9%.