Bank of Japan increases rates to highest level in 17 years

Japan’s central bank has raised borrowing costs to their highest level in 17 years, following a surge in consumer prices last year. The Bank of Japan (BOJ) increased its short-term policy rate to 0.5% after recent economic data revealed that prices rose at the fastest pace in 16 months.

This rate hike, the BOJ’s first since July, comes shortly after a weak US jobs report, which surprised investors and triggered a global stock market selloff. However, BOJ Governor Kazuo Ueda had signaled the hike in advance to prevent another market shock.

Official data shows that Japan’s core consumer prices rose 3% in December compared to the previous year. The BOJ’s decision marks its first rate increase since July and comes amid uncertainty, including potential impacts from Donald Trump’s return to the White House, where he previously threatened tariffs on US imports, which could affect exporting countries like Japan.

By raising rates, the BOJ now has more room to cut them in the future if needed to stimulate the economy. This move is part of a broader strategy to gradually increase rates to around 1%, a level economists believe will neither stimulate nor slow the economy. Last year, the BOJ raised borrowing costs for the first time since 2007, marking the end of negative interest rates globally. Negative rates, which made people pay to deposit money in banks, were previously used to encourage spending rather than saving.

Leave a Reply

Your email address will not be published. Required fields are marked *