BOJ Policymakers Warn of Inflation Risks, Hint at Rate Hike by Year-End

In the July 2025 meeting of the Bank of Japan (BOJ), some policymakers expressed concerns about growing inflationary pressures in the country. One member even signaled the chance of the central bank resuming interest rate hikes by the end of this year, suggesting a potential shift in the BOJ's monetary policy stance.

The summary of the meeting showed that while several board members warned of lingering uncertainty over the impact of U.S. tariffs, one welcomed Japan's recent trade deal with the U.S. as "great progress" that heightened the likelihood of the BOJ achieving its economic forecast. Another member said the BOJ would need "at least two to three more months" to fully assess the effects of the U.S. tariffs, adding that the impact on Japan's economy could remain "minimal" if the U.S. economy weathers the storm better than initially expected.

Notably, the BOJ revised up its inflation forecasts and offered a less pessimistic outlook on the economy compared to three months ago. This hawkish tilt reflects the receding pessimism over the U.S. tariffs, following Japan's successful trade negotiations with the Trump administration last month.

The summary also showed that a few other members on the nine-member board signaled the possibility of the BOJ resuming interest rate hikes, with one opinion stating that the central bank must continue to raise rates when possible as its policy rate is still below levels considered neutral for the economy.