BY LEIKA KIHARA
TOKYO — The Bank of Japan should resume interest rate hikes following a temporary pause to evaluate the impact of US tariffs, board member Hajime Takata said, signalling optimism the country was on track to durably achieve the central bank’s price goal.
While the BOJ must take its time scrutinizing the fallout from US tariffs, it may need to “nimbly” shift back to rate hikes in response to any changes to US policies, he said.
“My view is that the BOJ is currently only pausing its policy interest rate hike cycle, and should continue to make a gear shift (from ultra-loose monetary policy) after a certain period of ‘wait and see’”, Takata said in a speech on Thursday.
“Given uncertainties regarding various US policies remain high, the BOJ must conduct monetary policy in a more flexible manner without being too pessimistic,” he said.
The remarks by Takata, who is viewed by markets as taking a neutral to slightly hawkish stance on monetary policy, highlight the BOJ’s resolve to resume rate hikes once there is more clarity on whether the economy can weather the hit from US tariffs.
The BOJ ended a massive stimulus last year and in January raised short-term rates to 0.5 percent. While the central bank has signalled readiness to raise rates further, the expected impact of U t with robust corporate profits and labor shortages driving up wages and building price pressures.
Medium- and long-term infla tion expectations also continue to heighten steadily due not just to rising raw material costs but wage hikes, he said, adding that Japan is finally seeing signs of home-made inflation – a prerequisite for rate hikes.
