Some in Bank of Japan called for keeping rates low for now, June summary shows

[TOKYO] Some Bank of Japan (BOJ) policymakers called for keeping interest rates steady for the time being due to uncertainty over the impact of US tariffs on Japan’s economy, a summary of opinions at the bank’s June policy meeting showed on Wednesday (Jun 25).

Others in the nine-member board said inflation was moving at higher-than-expected levels, with one saying the BOJ may need to raise interest rates “decisively” at some point, even if economic uncertainty remained high, the summary showed.

At the Jun 16 to 17 meeting, the BOJ kept interest rates steady at 0.5 per cent and decided to decelerate the pace of its balance sheet drawdown next year, signalling its preference to move cautiously in removing remnants of its massive stimulus.

“Given high uncertainty, the BOJ should maintain accommodative financial conditions by keeping interest rates steady to support the economy,” one member said.

Several opinions warned of the expected hit to Japan’s fragile economy from sweeping US tariffs.

“While much of the hard data for April and May has been relatively solid, it is likely that the effects of tariffs are yet to materialise,” one member was quoted as saying.

“The BOJ must take some time examining the magnitude of the impact of US tariffs,” which will “certainly” exert downward pressure on business sentiment, another opinion showed.

A third opinion said Japan’s economy was “somewhat stagnant” even though the direct impact of US tariffs has yet to be observed, signalling growing pessimism within the BOJ.

Others saw rising inflationary pressure in Japan, driven in part by surging prices of the country’s staple rice, with some saying consumer inflation was accelerating more than expected.

“As the price of rice could affect perceived inflation and inflation expectations, it is necessary to closely monitor developments in rice prices,” one member was quoted as saying. REUTERS