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Bank of Japan policy board member says should be ready to raise rates at any time

2025-07-03 14:28:11

The Bank of Japan should be ready to resume tightening policy if U.S. trade talks make progress, said Sou Takada, a member of the central bank's policy board, who confirmed the central bank was still considering raising interest rates.

"I think the Bank of Japan is only pausing its rate hike cycle for now and should continue to shift gears after a period of 'wait and see,'" Takada said.

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“Given that uncertainty across U.S. policies remains high, I think the central bank needs to be more flexible in its approach to monetary policy and not be too pessimistic,” he said Thursday.

Economists are divided over the timing of the central bank's next rate hike. Some believe the BOJ could act in the fall once there is more clarity on trade talks. Others say the central bank won't raise rates at all this year. The BOJ has kept rates unchanged at 0.5% since its last hike in January because of uncertainty over tariffs. The bank is scheduled to hold its next meeting on July 30-31.

Many economists expect the Bank of Japan to remain on hold again this month as Japan fails to reach a trade deal with the United States.

President Trump has recently stepped up pressure on Japan, complaining that it does not buy enough American cars and rice.

Japan has said the two countries have differences in understanding in some areas. Japanese Prime Minister Shigeru Ishiba said on Wednesday that Japan is willing to work with the United States to balance trade between the two countries, but will only buy American products that meet national interests and standards.

With higher tariffs expected to slow the U.S. economy, the BOJ must be careful about the risk that divergences in monetary policy could lead to volatility in financial markets, especially exchange rates, Takata said.

He also said historical trends showed the Bank of Japan typically followed the United States in cutting interest rates.

" If the Fed resumes cutting interest rates, it could reduce the Bank of Japan's monetary policy flexibility, " Takada said.

However, he said a severe recession in the U.S. was unlikely. He said Trump's economic policies had mixed results, with measures such as tax cuts and deregulation likely to boost growth.

Speaking about Japan's economic conditions, Takada stressed that the Bank of Japan's inflation target is close to being achieved. He said the central bank should continue to adjust the degree of monetary easing if positive corporate behavior, including wage hikes, is confirmed.

The Bank of Japan’s quarterly tankan business survey earlier this week showed sentiment among big manufacturers improved in the second quarter despite concerns about the impact of higher U.S. tariffs.

“I want to closely monitor whether the momentum towards the price stability target, which has finally begun to take effect, will be dampened by the U.S. tariff policy,” Takata said.
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