TOKYO :The Bank of Japan should not rush into raising interest rates given various economic risks, its new board member Kazuyuki Masu said on Tuesday, reinforcing market views that U.S. tariffs will keep the central bank in a holding pattern for the time being.
While the initial gloom over the hit from U.S. tariffs seems to be subsiding somewhat, policymakers should not be complacent about their impact on Japan’s economy with trade talks with the U.S. still in progress, Masu said.
“Automobiles are the mainstay of Japan’s exports to the U.S. As such, we can’t have any preset idea on the impact (of U.S. tariffs) until a deal is struck,” he told a press conference after being officially appointed by the government to join the nine-member board.
Masu, a former chief financial officer of trading house Mitsubishi Corp, also said he agreed with the BOJ’s view that underlying inflation, or price moves driven by strength in domestic demand, remained short of its 2 per cent target.
“It’s true real interest rates are negative. But given recent economic developments, the BOJ shouldn’t be in a rush to raise rates,” he said, stressing the need to tread cautiously in rolling back the bank’s massive stimulus.
Masu joins the BOJ as U.S. President Donald Trump’s decision to impose sweeping tariffs worldwide, including on Japan, complicates the central bank’s plan to continue raising interest rates from still-low levels.
He replaced former Hitachi executive Toyoaki Nakamura, who was seen as among the most dovish members of the central bank’s board.
Masu said he was “probably right in the middle” with no strong bias, when asked whether he would brand himself as hawkish or dovish on monetary policy.
The BOJ exited a radical stimulus programme in March last year and raised interest rates to 0.25 per cent in July and to 0.5 per cent in January on the view that Japan was on the cusp of sustainably achieving its 2 per cent inflation target.
While the central bank has signalled readiness to raise rates further, Governor Kazuo Ueda said rate hikes would be put on hold until there was more clarity over the impact of U.S. tariffs.
The board reshuffle may influence the BOJ’s discussion on economic and price developments particularly with the departure of Nakamura, who voted against the BOJ’s decision to end negative rates and the two rate hikes. Nakamura left the board after his five-year term ended on June 30.
Masu’s appointment followed that in March of Junko Koeda, an academic known as a fiscal and monetary hawk who succeeded another dovish member – a pick analysts described as tipping the board increasingly in favour of slow but steady rate hikes.
