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.

"Japan's economy is recovering moderately, albeit with some weaknesses," the central bank said in a statement announcing the policy decision. "Uncertainty surrounding Japan's economy and prices remains high."

Markets are focusing on BOJ Governor Kazuo Ueda's press conference, expected at 3:30 p.m. JST (0630 GMT), for clues on whether the bank could raise rates in January or March.

The BOJ's meeting concluded hours after the U.S. Federal Reserve cut interest rates but signalled a more cautious path of easing next year, sending global stocks sharply lower.

"The more Ueda tries to explain the reasoning behind standing pat, the more he would sound dovish and could lead to receding expectations of a near-term rate hike," said Naoya Hasegawa, chief bond strategist at Okasan Securities.

"He might deliver hawkish comments on the future rate-hike path and Japan's neutral rate of interest to avoid rolling back expectations of a January or March rate hike too much."

Many market players see a declining yen as among the key incentives for the BOJ to hike rates or offer hawkish communication, as the currency's weakness pushes up inflation via higher import costs.

The BOJ ended negative interest rates in March and raised its short-term policy target to 0.25% in July. It has signalled a readiness to hike again if wages and prices move as projected.

But the central bank had been guarded on the timing of the next rate hike, causing market expectations of a move to fluctuate between December and January.

In a media interview last month, Ueda said the BOJ must scrutinise whether wage growth will sustain momentum and warned of big uncertainty over threats of higher tariffs by Trump.

All respondents in a Reuters poll taken earlier this month expect the BOJ to raise rates to 0.50% by end-March.

Japan's economy expanded an annualised 1.2% in the three months to September, slowing from the previous quarter's 2.2% increase, with consumption up a feeble 0.7%.

BOJ policymakers hope regular pay, which has risen at a year-on-year pace of 2.5% to 3% recently, keeps increasing and supports consumption.

There are growing signs companies are keen to continue hiking pay due to intensifying labour shortages, boding well for the BOJ's plan to keep raising interest rates gradually.

But slowing demand in China and uncertainty over the fallout from Trump's policies could weigh on corporate profits and discourage some of them from boosting pay.

After peaking at 4.2% in January 2023, core inflation has slowed steadily to hit 2.3% in October and shows few signs of flaring up with wage-driven price pressure remaining moderate.