Bank of Japan Rate Decision Live: At its highest level since September 1995, the Bank of Japan (BOJ) increased its benchmark policy rate by 25 basis points to 0.75%. This action raises the benchmark rate to a 30-year high, which might cause global markets to tremble. Thursday marked the start of the BOJ's last policy meeting of the year.
Bank of Japan Rate Decision Live: At its highest level since September 1995, the Bank of Japan (BOJ) increased its benchmark policy rate by 25 basis points to 0.75%. This action raises the benchmark rate to a 30-year high, which might cause global markets to tremble. Thursday marked the start of the BOJ's last policy meeting of the year.
Following the BoJ announcement, the yen depreciated vs the US dollar, indicating that the rate increase was completely priced into the market. At 156.02 per dollar, the yen was down more than 0.3%.
For years, Japan kept interest rates near or below zero to fight deflation, even as other major central banks lifted rates sharply following the epidemic. Even though Japan's economy shrank at a 2.3% annual rate in the most recent quarter, the BOJ was compelled to change its position due to growing inflationary pressures and strengthening business morale.
The yen's ongoing depreciation is one of the main causes of the shift. The value of imports including food, petrol, and necessities has increased due to the currency's decline against the US dollar and other major currencies. As foreign investors seek higher returns on assets denominated in yen, higher interest rates may help strengthen the yen by drawing more capital into Japanese markets.
With the BOJ anticipated to continue "normalizing" interest rates in 2026, the most recent rate increase also portends a more significant change in policy. Since Japan has traditionally been a source of inexpensive capital for investors globally, any additional tightening could have an impact on international markets. Currency patterns, bond markets, and investor mood in Asia, the United States, and Europe could be impacted by a stronger yen or additional rate increases.
Bank of Japan Rate Decision LIVE: Why did the BoJ raise important policy rates?
As the risks of responding too late grew and inflation pressures continued to be significantly higher than its target, the Bank of Japan raised interest rates. Last year, the central bank concluded that Japan was nearing a sustainable 2% inflation target and stopped its ten-year stimulus program.
A increasing number of BOJ board members are in favor of additional tightening to keep inflation from becoming too entrenched because persistently high food prices have kept inflation above goal for almost four years. According to data released on Friday, core consumer inflation in November was 3.0%, which is much higher than the BOJ's objective and unchanged from the previous month.
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