The Bank of Japan raised its key interest rate to about 0.5% from 0.25% Friday, noting that inflation is holding at a desirable target level. “The economy is gradually recovering,” BOJ Gov. Kazuo Ueda told reporters after a two-day policy board meeting in Tokyo.
Bank of Japan Deputy Governor Ryozo Himino said on Thursday that the central bank will continue to raise interest rates if the economy and prices move in line with the bank's forecasts.
Despite limited developments that would justify a policy shift since December, Japan's central bank nevertheless went ahead to raise interest rates.
The Bank of Japan raised interest rates on Friday to their highest since the 2008 global financial crisis and revised up its inflation forecasts, underscoring its confidence that rising wages will keep inflation stable around its 2% target.
Outside of a U.S. President bending norms, the Fed also faces challenges in achieving its economic objectives. Inflation remains above its 2% target: Its preferred measure is at 2.4%, though core prices — considered a better gauge of where inflation is headed — rose 2.8% in November from a year ago.
In a widely anticipated move, the Bank of Japan on Jan. 24 raised its short-term policy rate to 0.50% from 0.25%. Read more here.
Recent data show Japanese workers are gaining better wages and are generally set to receive solid pay raises in their upcoming annual union negotiations
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The Bank of Japan hiked interest rates on Friday to their highest level in 17 years and signalled more were in the pipeline despite fears of turmoil under US President Donald Trump.
The Bank of Japan raised its benchmark interest rate to 0.5% on Friday, marking its highest level since 2008, as the central bank moves to address persistent inflation and rising wages. The decision underscores a shift in monetary policy for a nation that has long struggled with stagnant price growth and economic stagnation.
Giving explicit advance signals, in addition to making the Bank of Japan feel boxed in, could breach Japanese law stipulating the nine-member board must debate and sign off on rate decisions at each policy meeting.
The return of inflation and wage growth is giving the Bank of Japan room to raise interest rates and declare the end of a long period of stagnation.