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 opinions highlight the tricky balance the BOJ faces in cushioning the economic blow from U.S. tariffs with ultra-low policy settings without causing an unwelcome spike in inflation by delaying rate hikes.
Uncertainty over U.S. trade policy likely dominated the BOJ board's discussion with several members warning of the risks to Japan's fragile economy from sweeping U.S. 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 U.S. 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 U.S. tariffs has yet to be observed, signalling growing pessimism within the BOJ.
Others were fairly sanguine about the impact from U.S. tariffs, with one saying the potential hit is unlikely to discourage firms from increasing wages and investment, the summary showed.
Some 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.
"Although uncertainty regarding trade policies remains extremely high, on the domestic front, wage developments have been solid, and consumer inflation has been slightly higher than expected," another opinion showed.
The BOJ ended a decade-long, massive stimulus programme last year and in January raised short-term interest rates to 0.5% on the view Japan was on the cusp of durably meeting its 2% inflation target.
While the central bank has signalled readiness to raise rates further, the economic impact of higher U.S. tariffs forced it to cut its growth forecasts and complicated decisions around the timing of the next rate increase.
Further muddling the policy outlook, consumer inflation has exceeded the BOJ's 2% target for more than three years as companies continue to pass on rising raw material costs.
A slight majority of economists in a Reuters poll expected the BOJ's next 25-basis-point increase to come in early 2026.
The BOJ will hold its next policy meeting on July 30-31, when it will release fresh quarterly growth and price forecasts.
