BOJ official says rate hike in 'pause mode' due to U.S. tariffs
TSU--For the time being, the Bank of Japan will hold off on interest rate hikes while it closely monitors developments in the United States, a BOJ Policy Board member said on July 3.
In a speech in Tsu, Mie Prefecture, Hajime Takata said that the BOJ is 'in a state of pause' in raising interest rates due to the need to assess the impact of the U.S. tariff policy.
However, since it is difficult to envision a serious recession occurring in the United States, Takata indicated that the BOJ would proceed with interest rate hikes, saying that the BOJ 'will continue to shift gears again after a certain wait-and-see period.'
Takata, an economist by training, is considered a 'hawk' who is open to raising interest rates.
In the speech, he expressed his belief that the BOJ's 2-percent inflation rate target is 'close to being realized.'
Takata then emphasized that the BOJ 'will carefully assess the trend of the U.S. tariff policy and its impact on the Japanese economy.'
In particular, he said, the BOJ will confirm the sustainability of 'positive corporate actions,' such as firm capital investments, wage increases and shifting cost increases to prices.
Takata also described Japan as an 'advanced country in dealing with trade friction,' having experienced trade rows with the United States in the past.
He noted that the financial conditions of Japanese companies have improved in the 30 years since the bursting of the bubble economy, saying, 'I believe that excessive pessimism is also a major risk.'
When asked at a news conference following his speech how long the BOJ would 'pause' interest rate hikes, Takata replied, 'I would like to see the situation well into the summer. I am not in a position to say how long it will be.'
Regarding the quarterly tankan survey for June, which showed that business confidence among large corporations and manufacturers improved for the first time in two quarters, Takata said, 'Overall, business confidence remained at a favorable level. The outlook is not under any significant downward pressure.'
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