BOJ Minutes Signal Rate-Hike Readiness Once Tariff Uncertainty Eases

Minutes from the Bank of Japan’s 16–17 June meeting, published on 5 August, show several policymakers prepared to restart interest-rate increases once uncertainty from U.S. trade tariffs subsides. While many members warned that the levies still pose downside risks to growth, some judged the drag could be smaller than first feared after Tokyo’s July agreement with Washington, and argued that the central bank should be ready to act ‘decisively’ if inflation stays above projections. Board members noted consumer prices have exceeded the BOJ’s 2 percent target for over three years, buoyed by higher food costs and sustained wage gains amid labour shortages. One participant cautioned that changes in price-setting behaviour at restaurants and food manufacturers could soon spread to other sectors, potentially stoking inflation expectations. At the June meeting the BOJ left its short-term policy rate at 0.5 percent and agreed to slow the pace of bond-purchase tapering next year. Some officials said any further tightening should wait until the full impact of the January rate hike and the U.S. tariff regime becomes clearer, while others argued the bank must avoid being forced into rapid moves later by raising rates in a ‘timely’ manner once conditions permit. A separate Summary of Opinions from the 30–31 July gathering, released on 8 August, echoed the divided but generally hawkish tone. One member said the policy rate remains below neutral and should be lifted when the opportunity arises; another urged maintaining accommodation for now given still-high external uncertainties. The documents together underline a data-dependent stance, with the path of trade policy seen as the principal swing factor for the BOJ’s next move.