The Bank of Japan (BOJ) has officially raised its benchmark interest rate to its highest level in 30 years, marking a significant turning point in the monetary policy of the world's third-largest economy. According to a statement following its latest policy meeting, BOJ Governor Kazuo Ueda said all members of the policy board voted unanimously to raise the interest rate by 0.25 percentage points, bringing the benchmark rate to 0.75%.
This interest rate hike is seen by observers as a continuation of Japan's decades-long process of "normalizing" its extremely loose monetary policy. For over 30 years, the Bank of Japan (BOJ) almost always maintained very low or even negative interest rates to stimulate growth and combat deflation. However, with consumer prices steadily rising around its target and the economy gradually emerging from its historical deflationary spiral, the BOJ believes it is time to adjust its policy towards a more cautious but hawkish approach.
Immediately after the announcement, the Japanese yen weakened again, falling to around 156 yen per US dollar. This development suggests that global financial markets had almost "pre-priced in" the BOJ's interest rate hike decision, and reflects the significant difference in monetary policy between Japan and the US, where the Federal Reserve continues to maintain high interest rates. Many investors believe that, despite the increase in Japanese interest rates, the 0.75% level is still quite low compared to other developed economies, preventing the yen from reversing sharply in the short term.
