The Bank of Japan raised interest rates on Friday to their highest levels since the 2008 global financial crisis, boosting its confidence that rising wages will keep inflation stably around its 2% target. The board decided to raise the BOJ’s short-term policy rate to 0.5% from 0.25% by an 8-1 vote, with board member Toyoaki Nakamura dissenting from the decision.
Experts noted that the outcome was in line with expectations, but the tone was slightly hawkish, with the BOJ raising its inflation forecast and hinting that it may continue to hike rates if the economy evolves as expected. The market expects the BOJ to raise rates every six months, and some analysts predict another 25 basis point hike by the end of the year.
The decision was seen as a move to maintain the balance between controlling inflation and supporting the economy, as the BOJ seeks to achieve its 2% inflation target. The bank’s governor, Kazuo Ueda, will hold a press conference to provide further guidance on the bank’s future rate path and economic outlook.
The yen reacted modestly to the news, with some analysts noting that the rate hike was fully priced in and that the market is now focused on Governor Ueda’s comments and the bank’s outlook for future rate hikes. The decision may have implications for the Japanese economy, with some experts predicting that the BOJ may hike rates again in the future to keep inflation in check.
