Bank of Japan Raises Policy Rate for First Time in Nearly 30 Years Amid Inflation Concerns
The Bank of Japan (BOJ) has raised its policy rate by 0.25 percentage points to approximately 0.75%, marking the first rate hike since January and the highest level since 1995. The central bank's decision was made by the policy board led by Governor Kazuo Ueda. This move comes as November's core inflation, which excludes food and fuel, rose 3% year-on-year, surpassing the BOJ's 2% target.
Prime Minister Sanae Takaichi, who had previously criticized rate increases as "stupid," now emphasizes prioritizing inflation control while keeping government borrowing costs low. Most economists anticipate another rate hike next year, possibly targeting around 1%. Despite the increase, the yen has remained weak, with analysts suggesting that the rate rise was already priced in by currency markets and may not significantly ease inflation immediately.
This shift by the BOJ marks a historic change after decades of low rates and will require around six months to assess its impact before any final moves. Notably, the BOJ's decision contrasts with other major central banks, as the Bank of England has cut its rate to 3.75% and the US Federal Reserve has reduced its rates to between 3.5% and 3.75%.
