Bank of Japan Maintains Interest Rates

(Reuters) – The Bank of Japan kept interest rates unchanged on Thursday. The dissent from one board member suggesting an increase in borrowing costs indicates that the central bank plans to tighten policy early next year.

As expected, the nine-member BOJ board voted 8-1 to maintain the short-term policy rate at 0.25%, reflecting a cautious stance due to uncertainties surrounding U.S. president-elect Donald Trump's economic plans.

Excerpts from BOJ Governor Kazuo Ueda’s News Conference

Japan's Neutral Rate of Interest
"We are mindful that when we are late in raising interest rates, it could lead to quicker future hikes to achieve neutral rates. Underlying inflation is rising but at a moderate pace, allowing us to proceed slowly."

How Long Will BOJ Wait for Clarity on Trump’s Policy?
"Uncertainty will always exist. As time passes, we will gather more information to improve our forecasts. However, we need to be careful not to fall behind by waiting too long."

Japan's Rate Outlook
"Real interest rates remain very low. If the economy and prices follow our forecast, we will continue to raise our policy rate. Timing will depend on careful scrutiny of various data."

Strength of Japan's Wage-Inflation Cycle
"More information on next year’s wage negotiations is needed to confirm the strength of Japan's wage-inflation cycle."

Uncertain Outlook
"There remains uncertainty regarding the U.S. and international outlook, particularly concerning the incoming U.S. administration’s policies."

New U.S. Administration in Focus
"The U.S. economy is stable, but the incoming administration's policies introduce uncertainty that we must assess closely."

Global Impact of U.S. Trade Policies
"The incoming U.S. administration’s trade and fiscal policies will impact global economies and financial markets, requiring careful analysis of Japan's economic conditions."

Impact of Yen Moves on Japan’s Inflation
"Recent data indicates a stabilization in the year-on-year increase in import costs."

Japan Wage Outlook
"Both Japan's wage outlook and the influence of Trump's policies will take time to fully understand. Comprehensive decisions will be based on available information at each meeting."

Pace of Rate Hike
"The gradual approach to raising interest rates is due to moderate underlying inflation."

Sustainability of Wage Hikes
"Recent domestic data aligns with forecasts, increasing the likelihood of economic alignment. Yet, further insight into the sustainability of wage increases is crucial before rate hikes."

Sufficient Wage Data to Hike Rates in January?
"It's impossible to predict executives' comments on wages. We will analyze these comments alongside other information for a complete outlook."

Does BOJ See 0.5% as Psychological Ceiling for Rate Hikes?
"I do not consider 0.5% a fixed ceiling. As rates move toward neutral levels, increased caution surrounding various factors is necessary."