By Lika Kihara, Makiko Yamazaki

TOKYO (Reuters) - The Bank of Japan left interest rates unchanged on Thursday but a dissenting board member's proposal to raise borrowing costs showed the bank remains on track to tighten policy early next year. .

As widely expected, the nine-member BOJ board voted 8-1 to keep its short-term policy rate unchanged at 0.25%, in a sign policymakers have been waiting for U.S. Presi- President-elect Donald Trump preferred to tread cautiously amid uncertainty over his economic plans.

However, dissenting board member Naoki Tamura, a known policy hawk, proposed raising interest rates to 0.5% given the risks to inflation. His proposal was rejected.

The BOJ meeting ended hours after the US Federal Reserve cut interest rates but signaled a more cautious path to easing next year, sending global stocks sharply lower.

"The decision to keep rates on hold was widely expected by investors, so I don't expect a big market reaction," said Ben Bennett, Asia-Pacific investment strategist at Legal & General Investment Management in Hong Kong. I do."

"That said, the hawkish Fed dot plot overnight gave the BOJ the option to raise rates, and there was a dissenting vote for a 25-bp hike, so it looks like rates will rise in early 2025."

The yen fell shortly after the decision to hit a one-month low of 155.28 per dollar, before paring some losses.

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

In a statement announcing the policy decision, the BOJ said Japan's economy is recovering moderately despite some weakness. It maintained its assessment that consumption is growing moderately as a trend.

The BOJ also reiterated its warning that uncertainty around Japan's economy and prices remained high.

Many market players see a falling yen as the main incentive for the BOJ to raise rates or offer a hokey communication, as the currency's weakness fuels inflation through higher import costs.

The BOJ ended negative interest rates in March and raised its short-term policy target to 0.25% in July. If wages and prices move as expected, it signals readiness for another hike.

But the central bank remained cautious about the timing of the next rate hike, leading to volatile market expectations between December and January.

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

Japan's economy expanded an annualized 1.2% in the three months to September, slower than the previous quarter's 2.2% growth, with consumption a weak 0.7%.

BOJ policymakers hope that regular wages, which have recently grown at a year-on-year pace of 2.5% to 3%, continue to grow and support consumption.

There are growing signs that companies are eager to continue raising wages due to labor shortages, boding well for the BOJ's plan to gradually raise interest rates.

But slowing demand in China and uncertainty about the outcome of Trump's policies could weigh on corporate profits and discourage some of them from raising wages.

After peaking at 4.2% in January 2023, core inflation has slowed to 2.3% in October and shows few signs of abating as wage-driven price pressures moderate.