Bank of Japan Gov. Kazuo Ueda said U.S. President Donald Trump’s tariff campaign has brought the economy to a "bad scenario" that could force the central bank to make a policy response, the Sankei newspaper reported Wednesday.

In an interview with the Sankei, Ueda reiterated the BOJ’s policy stance to raise interest rates if economic outlook is realized. At the same time, he also indicated a chance of a policy action while the central bank is still in the process of examining economic and market situations.

"Although a policy response may be necessary depending on the situation, we will make an appropriate decision depending on the changing situation,” Ueda said in the interview that took place on Monday. Ueda also said that authorities will continue to adjust the degree of easing if the economy and prices move in line with the bank’s outlook.

Ueda’s latest remarks are consistent with the signals he has sent in parliament, where he has cautioned about downward pressures on the economy and intensified uncertainties related to global trade developments.

The comments show that the BOJ is carefully monitoring U.S. tariff developments and assessing the potential impacts, reinforcing speculation that authorities aren’t likely to consider a near-term rate hike. By reiterating the existing stance on pursuing a hike if conditions allow, Ueda signaled that the bank is keeping its options open down the road. Recent economic data suggested the price trend was rising toward the BOJ’s goal — at least until Trump’s tariffs kicked in.

The yen fluctuated after the Sankei report.

"He clearly stated that the U.S. tariff policy is a bad scenario, and the overall impression was dovish,” said Katsutoshi Inadome, senior strategist at Sumitomo Mitsui Trust Asset Management.

Although there was some market speculation that tariff measures might not be so negative, the situation has been moving toward a bad scenario since February, Ueda said. The bank raised its benchmark rate to 0.5% in January.

Ueda’s comments come as many economists have pared growth forecasts for Japan and pushed back expectations regarding the likelihood of another BOJ rate hike after Trump imposed higher-than-expected tariffs on some of Japan’s key exports, including autos.

Ueda said he will continue to assess the impact of the duties on the economy by analyzing information from hearings of economic entities as the data alone won’t be sufficient.

"Sentiment among some firms and households has already been affected,” Ueda said in the interview. "We will conduct our policy appropriately in line with a shift in risk assessment and projections.”

The BOJ is widely expected to hold settings steady when it next sets policy on May 1.