TOKYO (Kyodo) -- The Bank of Japan decided Tuesday to slow the pace of its government bond-buying reduction beyond next year while keeping interest rates unchanged, underscoring a cautious approach to normalizing monetary policy amid trade and economic uncertainties.

At a press conference following the BOJ's two-day policy meeting, Governor Kazuo Ueda expressed concern about the outlook for Japan's economy in light of U.S. President Donald Trump's tariff hikes, saying downside risks now "exceed" upside ones for both growth and prices.

Under the latest plan, the central bank will scale back its debt buying by 200 billion yen ($1.4 billion) per quarter from April 2026, down from the current 400 billion yen. The total amount of purchases will decline to about 2 trillion yen monthly in early 2027.

With Trump's tariffs expected to take a heavy toll on Japan's export-driven economy, the BOJ kept its benchmark policy rate unchanged at 0.5 percent, marking the third straight meeting without an adjustment.

Ueda warned that the economic impact of Trump's tariffs might intensify later this year, saying the levies -- targeting the auto sector, one of Japan's primary growth engines -- might affect how the central bank proceeds with its monetary policy.

Asked about Prime Minister Shigeru Ishiba's summit with Trump in Canada on Monday, where the two failed to bridge differences over tariffs, Ueda said a delay in concluding bilateral negotiations would heighten uncertainty over trade and economic prospects.

Earlier in the day, the BOJ said in a statement issued after the board meeting, "It is extremely uncertain how trade and other policies in each jurisdiction will evolve and how overseas economic activity and prices will react to them."

Ueda said the BOJ will continue raising interest rates as needed but noted that trade policies in other countries "pose a downside risk." He added the bank will review the pace of its bond purchase reductions, if necessary, to avoid unforeseen market turbulence.

"It is desirable to keep reducing the amount of bond purchases further, given that long-term interest rates should be determined by financial markets," but aggressive tapering may cause "unpredictable effects," Ueda said.

He also pledged to "make nimble responses," such as expanding the amount of debt buying "in the case of a rapid rise in long-term interest rates" in a bid to stabilize the market. Bond prices and yields move in opposite directions.

Junichi Makino, chief economist at SMBC Nikko Securities Inc., said the BOJ apparently expects the domestic economy to decelerate in the face of a downturn in overseas economies but eventually recover in line with a rebound abroad.

An additional interest rate hike could come "between March and June next year," Makino added.

After ending a decade of unorthodox monetary easing aimed at combating deflation, or falling prices, including massive asset purchases, the BOJ raised interest rates in March last year for the first time in 17 years.

As part of its policy normalization efforts, the central bank decided in July to introduce a quantitative tightening program through March 2026 to trim its bloated balance sheet before lifting its key interest rate again in January.

Regarding the recent escalating conflict between Israel and Iran, Ueda said the BOJ will closely monitor developments, as it is likely to drive up crude oil prices, triggering cost-push inflation and eroding consumer sentiment in resource-poor Japan.

Japan's economy shrank an annualized real 0.2 percent in the January-March period, the first contraction in a year, underscoring that domestic demand was sluggish even before U.S. tariff hikes took full effect.

Core consumer prices rose 3.5 percent in April from a year earlier, the fastest pace in over two years, driven by rising material costs and surging prices of rice, Japan's staple food.