Dovish BOJ Member Urges Caution in Raising Rates Further

By Megumi Fujikawa

The Bank of Japan needs to tread carefully when tightening policy, board member Toichiro Asada said, warning about the risk of higher interest rates hurting economic growth.

"Downside risks to the economy posed by a policy rate hike will gradually increase if the continued rate hikes have tightened financial conditions or have reduced the degree of accommodation," Asada told business leaders in the southern Japanese city of Nagasaki on Thursday.

Asada is a former economics professor known for his dovish, reflationist stance. He was one of two dissenters who voted against the BOJ's interest-rate increase to 1.25% in September, before backing the decision to stand pat in October.

Financial markets watch Asada's comments closely for hints on the Japanese government's stance on monetary policy, since he was appointed by Prime Minister Sanae Takaichi.

His speech on Thursday came at a particularly delicate juncture for Japanese policymakers: Stronger-than-expected U.S. consumer inflation data has revived expectations for further Federal Reserve interest-rate hikes, driving the yen down toward the critical 160 threshold against the dollar.

The dollar was last trading at 159.79 yen, raising speculation about potential intervention.

While his more hawkish colleagues have called for prompt, flexible action to keep inflation in check, Asada on Thursday emphasized the fragility of Japan's economic recovery and the risk that higher borrowing costs could choke off consumer and corporate activity.

Recent price increases in Japan haven't necessarily been driven by demand, and parts of the economy--particularly private consumption--look sluggish, Asada said. That makes it necessary for the BOJ to give due consideration to the pace of further tightening, he added.

Before the BOJ raises interest rates again, it should confirm that higher wages are fueling demand-driven inflation, and that wages and prices are rising in tandem to a greater degree, Asada said.

At its October meeting, the central bank said underlying inflation had reached its 2% target, while pledging to monitor whether that trend will hold. It remains alert to the risks that the Middle East conflict, a weak yen and demand related to artificial intelligence pose to growth and price projections.

Markets are widely factoring in the possibility of a December hike to counter persistent inflation.

Write to Megumi Fujikawa at megumi.fujikawa@wsj.com

(END) Dow Jones Newswires

November 11, 2026 21:43 ET (02:43 GMT)