The Bank of Japan (BOJ) increased interest rates to their highest point since the 2008 global financial crisis, signaling confidence in wage growth and stable inflation around its 2% target. This marks the first rate hike since July 2022 and follows the inauguration of US President Donald Trump, prompting vigilance regarding potential tariff impacts. The BOJ raised its short-term policy rate from 0.25% to 0.5%, a level unseen in 17 years. The central bank aims to steadily push rates to around 1%, a level deemed neither restrictive nor expansionary. The decision was driven by rising wage expectations and strengthening underlying inflation, with the BOJ projecting core consumer inflation to reach 2.4% in fiscal 2025 and 2.0% in 2026.
: The Bank of Japan raised interest rates on Friday to their highest since the 2008 global financial crisis, underscoring its confidence that rising wages will keep inflation stably around its 2% target.
The move underscores the central bank's resolve to steadily push up interest rates to around 1% - a level analysts see as neither cooling nor overheating Japan's economy.“The likelihood of achieving the BOJ's outlook has been rising,“ with many firms saying they will continue to raise wages steadily in this year’s annual wage negotiations, the central bank said in a statement announcing the decision.
“Their logic remains the same. They are still far away from neutral, so it’s natural to make an adjustment. It’s not necessarily a tightening, rather a lesser easing, in a sense,“ said Naka Matsuzawa, chief macro strategist at Nomura Securities. In a quarterly outlook report, the board raised its price forecasts on growing prospects that broadening wage gains will keep Japan on track to sustainably hit the central bank's inflation target.
Economics Finance Bank Of Japan Interest Rates Inflation Economy Wages
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