The Bank of Japan’s most dovish board member warned against hurrying to raise the benchmark interest rate as authorities will need to closely monitor the impact of U.S. tariffs on economic activity.

"Given the extremely high uncertainties in play, my view is that it is appropriate for the bank to conduct monetary policy deliberately to reflect the actual state of economic recovery,” Toyoaki Nakamura, the board member, said in a speech Friday in Fukuoka Prefecture.

In the last scheduled speech before his five-year term ends next month, Nakamura stuck with his cautious stance after consistently voting against rate hikes undertaken by Gov. Kazuo Ueda starting in March last year. His remarks counter a recent revival of market speculation over the chances of the BOJ raising borrowing costs this year. Some market participants renewed those bets after a trade deal between U.S. and China eased tensions in global financial markets.

Nakamura’s speech comes shortly after government data showed that Japan’s economy shrank more than expected in the first quarter, highlighting vulnerability even before U.S. President Donald Trump’s tariffs were expanded to include a 25% tariff on autos — a key export — from April.

"If the bank rushes to raise the policy interest rate even during an economic slowdown, this could dampen both consumption and investment, with a lag,” Nakamura said.

Consumer inflation has stayed at or above the BOJ’s 2% target for about three years, while real wages posted gains in just four months over that time span. Households have tightened their purse strings as a result. Daiwa Securities and NLI Research Institute are among those pointing to the risk of another economic contraction this quarter, a development that would put the country in a technical recession.

Traders see about a 63% chance of the BOJ hiking its key rate from the current 0.5% within this year, up from about 52% a week ago. A summery of opinions from the bank’s May policy meeting showed that board members are still eyeing a rate hike if economic conditions allow it.

In dissenting from three BOJ rate hikes since March 2024, Nakamura, a former executive at Hitachi, noted the need to monitor more data.

Kazuyuki Masu, a former executive of Mitsubishi Corp. is tapped to take over his position on the board after Nakamura’s term ends on June 30, about two weeks after authorities next set policy on June 17.