Japan Finance Minister says rate hikes could hurt economic recovery

Japanese Finance Minister Shunichi Suzuki said on Friday hiking interest rates could hurt the economic recovery, signalling support for the central bank's stance to keep monetary stimulus despite a global tightening trend amid rising inflation.

"Generally speaking, rate hikes could cause the economy to falter. We must think about it," Suzuki told reporters, when asked about the Bank of Japan's decision on Thursday to retain its ultra-easy policies.

"The BOJ made the decision yesterday and the government respected it. We expect the BOJ to conduct monetary policy firmly," he added.

The comments indicate tacit government support for the BOJ's stance against a premature exit from monetary stimulus, even as central banks from the United States to Europe rapidly raise interest rates.

Japan's core consumer prices rose 2.2 per cent in the year to June due to surging global commodity inflation, although that pace lags other countries and is not expected to sustainably hold above the BOJ's 2 per cent target.

The central bank projected inflation would exceed its target this year in fresh forecasts issued on Thursday, but maintained ultra-low interest rates and signaled its resolve to remain an outlier in a wave of global central banks' policy tightening.

"We must be mindful of price hikes becoming downside risks to the economy through worsening sentiment and a decline of real purchasing power, weighing on corporate activity and consumption." Suzuki said. "It's important to carry out necessary measures in accordance with prices and economy."