By Megumi Fujikawa
Bank of Japan policy board member Toyoaki Nakamura said the central bank should pause monetary tightening, as higher tariffs could hurt the nation's virtuous cycle of income, spending and inflation.
"As the impact of U.S. tariff policies is currently a widely shared concern, it is necessary to carefully gauge developments in corporate profits, business fixed investment, wage hikes and other factors," Nakamura said in a speech Friday at an event held in Japan's southern prefecture of Fukuoka. "I believe it is appropriate for the bank to maintain its current monetary policy for the time being."
The BOJ left its policy rate at 0.5% earlier this month as it slashed its growth forecasts amid uncertainty about U.S. trade policy. Gov. Kazuo Ueda said underlying inflation may reach its target of 2% later than expected.
Nakamura, a former executive at Japanese electronics conglomerate Hitachi, said rushing to raise interest rates during an economic slowdown would damp consumption and investment. He also said that U.S. tariffs could weaken momentum for wage growth, which has finally gathered pace in recent years.
Government data released Friday showed that the Japanese economy shrank in the January-March period for the first time in a year. Economists say slowing exports and sluggish domestic demand could push the nation into a technical recession this quarter.
Despite risks surrounding the economic outlook, Ueda has said that the bank will continue to seek further interest-rate hikes if the economy and prices move in line with its projections.
Nakamura is considered among the most dovish members of the BOJ policy board. He has voted against the bank's decisions to raise rates.
His five-year term as a BOJ board member is set to end in June. The Japanese government has nominated former Mitsubishi Corp. executive Kazuyuki Masu to replace Nakamura.
Write to Megumi Fujikawa at megumi.fujikawa@wsj.com
(END) Dow Jones Newswires
05-16-25 0115ET
