By Megumi Fujikawa

TOKYO--With the yen's weakness making inflation sticker, some Bank of Japan policy board members grew more concerned about upside risks to prices at its January meeting when the central bank decided to raise interest rates.

"One member expressed the view that there was a risk that inflation expectations would exceed 2%, with CPI inflation remaining significantly above 2%," according to minutes for the bank's Jan. 23-24 meeting. The BOJ lifted its policy rate to 0.5% from 0.25% at that meeting.

Some of the nine-member policy board said they thought consumer inflation, excluding volatile fresh food, is likely to be in the range of 2.5% and 3.0% for the current fiscal year ending March 31 and stay at around 2.5% in the following year due partly to higher import prices caused by a weak yen, the minutes showed.

One of the members said it would mean that inflation would run above the bank's target of 2% for four consecutive years if the outlook becomes a reality, leading to a stronger perception of price increases among economic entities.

The minutes showed that the board agreed to seek more interest-rate increases, with most of the board members seeing the Japanese economy generally in line with the bank's outlook. One board member said the BOJ should raise the policy rate to around 1% in the second half of the next fiscal year if the economy and prices continue to improve as projected.

Gov. Kazuo Ueda has recently become more cautious about the risks President Trump's economic policies could have on the global economy. But the January minutes showed that board members had then felt comfortable about making the decision to raise the policy rate as markets were stable after Trump's inauguration.

Still, one member said the policies taken by the new U.S. administration could affect Japan's economy in various ways, the minutes showed. "The resilience of Japan's economy as a whole had increased enough to withstand some downward stress," the member added.

Another member said there was a possibility that a resurgence of inflation in the U.S. and trade frictions would occur simultaneously, which could eventually cause stagflation. The BOJ wouldn't be able to manage such a scenario simply by easing monetary policy, the member said.

There were also some careful opinions about how to communicate the bank's future policy path.

"Considering that both upside and downside risks were significantly large, the bank should be extremely careful about suggesting the pace of policy interest rate hikes and the terminal policy rate, which corresponds to the peak level of the policy interest rate," one member was quoted as saying.

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

(END) Dow Jones Newswires

March 24, 2025 22:00 ET (02:00 GMT)

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