(Reuters) – The Bank of Japan kept interest rates steady on Thursday, as policymakers preferred to tread cautiously in pushing up borrowing costs amid uncertainty over U.S. president-elect Donald Trump’s economic plans.

As widely expected, the nine-member BOJ board decided to keep its short-term policy rate unchanged at 0.25%. But hawkish board member Naoki Tamura dissented and proposed raising interest rates to 0.5% on the view inflationary risks were building. His proposal was voted down.

QUOTES:

TAKUMI TSUNODA, SENIOR ECONOMIST, SHINKIN CENTRAL BANK RESEARCH INSTITUTE, TOKYO

“The BOJ likely decided to give it a miss, judging that it would be fine to wait and confirm the trends for another month. But in any case, the conditions for another hike are being met. Japan’s inflation is on a slight upward trend, and import prices are again beginning to rise a bit due to the weak yen. The BOJ should be able to raise rates easily at the January meeting.”

MARI IWASHITA, EXECUTIVE ECONOMIST, DAIWA SECURITIES, TOKYO

“The information the Bank of Japan wanted most today was what the Fed thought about rate cuts next year. The Fed gave the impression that they weren’t in a hurry. There is a FOMC meeting in January, and with an assumption that the Fed would keep current rates steady next month, if the market becomes stronger for the dollar and weaker for the yen, the BOJ will have a better chance to raise interest rates.”

KAZUTAKA MAEDA, ECONOMIST, MEIJI YASUDA RESEARCH INSTITUTE

“The latest decision signals the BOJ’s attempt to avoid any surprise for markets after the July rate hike led to high volatility. We expect the BOJ to raise rates in January after confirming the broad picture of how spring wage talks will likely turn out. If the BOJ foregoes a rate hike again in January while saying the economic recovery is on track, that could spur jitters among market players over why it’s skipping a hike.

“If the yen falls further towards 160 per dollar, the BOJ will face even more pressure to raise rates next month.”

BART WAKABAYASHI, TOKYO BRANCH MANAGER, STATE STREET, TOKYO

“They probably want to wait till next year and want some more solid information coming in on the wage front from Japanese corporations – that’s going to be in March or April.

“As long as they can confirm wages will continue to increase… then they’ll have a bit more confidence to take the next step.

“I do think the BOJ is looking at the U.S. economy and how it will react to a new administration.”

CHARU CHANANA, CHIEF INVESTMENT STRATEGIST, SAXO, SINGAPORE

“The Fed’s hawkish tilt and the BOJ’s pause could bring fresh reasons for yen traders to ‘carry’ on. The only thing in the way of new carry trades is heightened volatility – which means USDJPY could face a firm resistance at 160 if not before.

“There is some hawkish tilt in the decision – particularly one dissenter in favour of a hike and more signs of wage-price spiral intensifying. However, it remains unlikely that Ueda can clearly signal a January rate hike given the uncertainties around the Fed and Trump presidency.”

NAKA MATSUZAWA, CHIEF STRATEGIST, NOMURA SECURITIES, JAPAN

“So far, it’s no surprise here, but I guess yesterday’s FOMC result put the BOJ sort of in a corner where the BOJ cannot be too dovish so that they can keep the yen from falling. At the same time, actually they cannot be too hawkish either.

“So, the question is whether they can still retain market expectation for a hike in January, which has now almost come down to 50%. I think we have to depend on the governor’s presser later on, so that expectation’s not gonna be gone completely. Even the Nikkei or stock market will wait for the governor’s presser. So, I don’t think they will really react to this largely, but they could marginally drop on the back of the weak yen.”

ALVIN TAN, HEAD OF ASIA FX STRATEGY, RBC CAPITAL MARKETS, SINGAPORE

“I would’ve thought that given the Fed’s somewhat hawkish statement, you could argue that actually kind of helps the BOJ to also provide a bit more of a hawkish guidance…. but that didn’t happen.

“We still have Governor (Kazuo) Ueda’s press conference coming up. But in general, if he remains noncommittal about imminent hikes, then I think that would be unabashedly dovish.”

SHOKI OMORI, CHIEF JAPAN DESK STRATEGIST, MIZUHO SECURITIES, TOKYO

“Monetary policy has been maintained as expected.”

“Given that the economic assessment remained unchanged, the USD/JPY pair briefly touched 155 following the release of the statement. The issue now is the extent to which the yen will be sold against major currencies from this point forward. Should the USD/JPY pair easily surpass the Ministry of Finance’s defence lines at 158, 160, and 162, there is a possibility that the Ministry of Finance and the Bank of Japan may issue statements to curb yen depreciation. The next resistance level is likely to be around 156 yen.”

CHRISTOPHER WONG, CURRENCY STRATEGIST, OCBC, SINGAPORE

“This would have been a good window for the BOJ to hike given a hawkish Fed, but the Fed’s pause and the BOJ’s reluctance suggest that the dollar/yen may face upward pressure.

“Price-related data and labour market reports continue to support the case for BOJ to hike. The Fed turning more hawkish should also have given BOJ policymakers some comfort in raising rates today.”

BEN BENNETT, ASIA-PACIFIC INVESTMENT STRATEGIST, LEGAL AND GENERAL INVESTMENT MANAGEMENT, HONG KONG

“The decision to keep rates on hold was widely expected by investors, so I don’t expect a big market reaction. That said, the hawkish Fed dot plot overnight gave the BOJ an option to increase rates, and there was one dissenting vote for a 25-bp hike, so it looks like rates will be going up early in 2025.”

MASAHIRO ICHIKAWA, CHIEF MARKET STRATEGIST, SUMITOMO MITSUI DS ASSET MANAGEMENT, TOKYO

“The decision was in line with market expectations, but Nikkei futures pared losses, which indicated a relief among investors, as the decision came right after the unexpectedly hawkish view of the U.S. Federal Reserve’s rate path for next year.” (This story has been corrected to fix the name of the BOJ governor from ‘Kajuo’ to ‘Kazuo’ in the RBC Capital Markets’ quote, in paragraph 15)

(Reporting by Reuters Asia markets team; Editing by Subhranshu Sahu)

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