The OECD secretary-general said the BOJ is not clearly behind the curve on rates and called for reform of international trading rules, describing the upcoming Trump-Xi summit as an important part of that process.

Summary:

• The BOJ is not considered clearly behind the curve on monetary policy, with inflation expectations anchored and wage dynamics continuing to strengthen
• Market-distorting practices, including the use of subsidies to create unfair trade advantages, need to be more effectively addressed to preserve well-functioning global markets
• Reform of rules-based international trading arrangements is necessary, and dialogue between President Trump and President Xi at this week’s summit is viewed as an important component of that broader process
• Boosting supply chain resilience, strengthening economic security and tackling unfair trade practices are all identified as priorities
• On the US-China summit, the secretary-general stressed that dialogue is always important for maintaining a rules-based global system

The OECD secretary-general has offered a measured defence of the Bank of Japan’s monetary policy stance while calling for substantive reform of the international trading system, framing the upcoming summit between President Donald Trump and Chinese President Xi Jinping as a necessary but insufficient step toward resolving deeper structural tensions in global trade.

On monetary policy, the secretary-general said the BOJ cannot be considered clearly behind the curve, pointing to anchored inflation expectations and strengthening wage dynamics as evidence that Japan’s gradual tightening path remains appropriate. The remarks align with the OECD’s broader projections, published earlier Wednesday, that the BOJ will raise its policy rate to 2% by the end of 2027, and suggest the organisation sees no urgent case for the central bank to accelerate that timeline despite external pressure from the Middle East conflict and global energy market disruption.

On trade, the secretary-general struck a more urgent tone. Market-distorting practices, particularly the use of government subsidies to engineer unfair competitive advantages, were identified as issues that require better and more systematic international responses if well-functioning global markets are to be preserved. The remarks carry clear implications for the ongoing friction between Western economies and China over industrial policy and state support for strategic sectors.

The Trump-Xi summit, scheduled for later this week in Beijing, was framed as an important moment for dialogue, but the secretary-general was careful to situate it within a larger multilateral context. Bilateral engagement between the world’s two largest economies matters, but the OECD’s position is that durable solutions require reform of the rules-based international trading architecture more broadly, not simply a managed accommodation between Washington and Beijing.

Supply chain resilience and economic security were also highlighted as priorities, reflecting the OECD’s concern that the vulnerabilities exposed by successive shocks since the pandemic have not yet been adequately addressed at a systemic level.