MNI: BOJ Stresses Wait and See Approach - Opinions

Several Bank of Japan's board members expressed caution about raising interest rates at the April 30-May 1 meeting, citing significant uncertainty over the outlook for the economy and prices, according to the summary of opinions released Tuesday, with policymakers agreeing that the timing of any future rate hike must be considered carefully.

The summary did not offer any hint regarding the pace or timing of rate increases, reflecting the board's cautious stance at the meeting, which lead to a hold of the 0.5% policy rate. (See MNI BOJ WATCH: Unchanged; Ueda Insists Rates To Rise Gradually)

A key source of uncertainty was the evolving U.S. tariff policy. 

One member said the BOJ should "wait and see" until developments become more settled. Another noted that, amid high uncertainties – including those surrounding future tariff negotiations – the economic outlook itself could shift in either direction. This made it necessary to assess both the likelihood of the forecast materialising and the risks associated with it, the members said.

Another board member remarked that the BOJ must carefully consider the impact of U.S. trade policy on Japan’s economy and, for that reason, believed it appropriate to maintain the current monetary policy. Similarly, a different member emphasised that U.S. tariffs are likely to exert downward pressure on both economic activity and prices in Japan.

One member described the bank’s economic and inflation forecasts as provisional, stressing that the fluid nature of U.S. trade policy and corporate responses to it could result in considerable revisions to the outlook.

INFLATION CONCERNS

Concerns over inflation were also raised. One member noted that while tariffs might either increase or decrease prices due to supply chain disruptions and economic deceleration, both outcomes could hurt wages. This makes it highly likely that U.S. tariff policy would put downward pressure on Japan’s underlying inflation, they noted. Another member pointed out that prices are expected to continue rising at around 2% until fiscal 2027, but warned that there are upside risks, particularly from global supply chain disruptions.

The BOJ has recently lowered its forecasts for economic growth and inflation for both the current fiscal year and fiscal 2026, and acknowledged that the risks to both remain tilted to the downside.

Finally, one member warned against excessive flexibility in reacting to market expectations. While acknowledging that central banks must consider market views, they argued that too much responsiveness could undermine policy predictability and lead to increased market uncertainty. 

The BOJ, they said, should avoid actions that may contribute to such instability.