Tokyo: The Bank of Japan (BOJ) raised interest rates on Friday to their highest level since the 2008 global financial crisis, signaling confidence in stable inflation around its 2% target.
The BOJ increased its short-term policy rate from 0.25% to 0.5%, marking its first rate hike since July last year. The decision was made in an 8 to 1 vote, with board member Toyoaki Nakamura dissenting.
This 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 BOJ cited rising wages and a stable inflation outlook as key factors in its decision.
“The likelihood of achieving the BOJ’s outlook has been rising,” the central bank said in a statement, noting that many firms plan to continue raising wages steadily in this year’s annual wage negotiations.
The yen rose around 0.5% to 155.32 per dollar following the decision, while the two-year Japanese government bond (JGB) yield rose to 0.705%, the highest since October 2008.
Attention now shifts to BOJ Governor Kazuo Ueda’s post-meeting briefing for clues on the pace and timing of further increases.