By Leika Kihara
TOKYO () -Some Bank of Japan policymakers called for keeping interest rates steady for the time being due to uncertainty over the impact of U.S. tariffs on Japan's economy, a summary of opinions at the bank's June policy meeting showed on Wednesday.
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 views underscore the delicate equilibrium the Bank of Japan must maintain when trying to mitigate the economic impact caused by U.S. tariffs through extremely low-interest-rate policies, all while avoiding an unintended surge in inflation by postponing interest rate increases.
During the June 16-17 gathering, the BOJ maintained interest rates at 0.5% and opted to reduce the rate of decrease in its balance sheet starting next year, indicating their inclination towards proceeding carefully with the withdrawal from extensive monetary support measures.
The discussions at the BOJ board were probably heavily influenced by uncertainties surrounding U.S. trade policies, with multiple members expressing concerns about potential threats to Japan’s vulnerable economy due to extensive American tariff measures.
One member reportedly stated that even though most of the robust data from April and May is now available, it seems probable that the impacts of the tariffs have not fully emerged.
"The BOJ needs to spend some time assessing the extent of the influence from U.S. tariffs," as this will "undoubtedly" put downward pressure on corporate confidence, according to another viewpoint.
A third viewpoint suggested that Japan’s economy appears “rather sluggish” despite the fact that the immediate effects of U.S. tariffs have not been seen, indicating increasing doubt among BOJ officials.
Other participants remained relatively optimistic regarding the effects of U.S. tariffs, as one noted that the possible consequences are not expected to deter companies from boosting wages and investments, according to the summary.
A few people observed increasing inflationary pressures in Japan, partly due to soaring rice prices which are a dietary staple there. Some believed that consumer inflation was escalating faster than anticipated.
"One member noted that since the cost of rice can influence perceived inflation and shape future inflation expectations, it’s important to keep a close watch on changes in rice prices," they said.
"While there continues to be significant uncertainty about trade policies, domestically, wages have shown robust growth, and consumer inflation has come in somewhat above projections," an alternative viewpoint indicated.
Last year, the BOJ concluded a lengthy ten-year period of extensive monetary stimulation. In January, they increased short-term interest rates to 0.5%, believing that Japan was nearing a sustainable achievement of their 2% inflation objective.
Although the central bank indicated preparedness for additional interest-rate hikes, the economic effects of increased U.S. tariffs led them to reduce their growth projections and made it more challenging to determine when to implement the subsequent rate rise.
Moreover, complicating the policy landscape, consumer inflation has surpassed the BOJ's 2% objective for over three years now, as businesses keep transferring escalating raw material expenses to consumers.
In a survey, a narrow margin of economists predicted that the BOJ's subsequent 25-basis-point hike would likely occur at the beginning of 2026.
The BOJ is scheduled to conduct its upcoming policy meeting on July 30-31, at which time it will issue new quarterly projections for economic growth and prices.
(Reported by Leika Kihara; Edited by Tom Hogue and Shri Navaratnam)