Japan’s interest rates jump
The Bank of Japan (BoJ) has raised interest rates to their highest levels in 30 years, taking another step in ending decades of near-zero borrowing costs and massive monetary support.
The central bank also signalled its readiness to continue hiking rates by offering a slightly more upbeat view on the outlook for growth and inflation, emphasising its views the country is on course to hit its two per cent inflation target backed by wage gains.
The BoJ raised short-term interest rates to 0.75 per cent from 0.5 per cent on December 19 for their first increase since January as inflation remains elevated, the yen remains weak against the US dollar and take-home wages continue to fall.
The central bank has been assessing whether conditions are right for higher rates, keeping a close eye on the effects of American tariffs on the Japanese economy and wage increases.
In a statement issued on Friday, it reports tariff-related uncertainties have diminished while Japanese companies will probably remain committed to raising wages in 2026.
“It’s highly likely the mechanism where both wages and prices will moderately increase will be maintained,” says Kazuo Ueda, pictured, governor of the BoJ. He adds economic and price data appear on track to meet the central bank’s forecasts and achieve its target of stable two per cent underlying inflation.
Although the BoJ raised rates to 0.75 per cent, Ueda says real interest rates are still in deep negative territory, and adds the central bank will keep increasing rates if economic and price data are in line with its forecasts.
