Bank of Japan Raises Interest Rates to 17-Year High, Signals Further Increases

The central bank hikes rates to 0.5%, citing sustained inflation and wage growth, while preparing markets for gradual normalization of monetary policy.

The Bank of Japan increased its short-term policy rate from 0.25% to 0.5%, the highest level since 2008, in an 8-1 vote during its two-day policy meeting.
The decision reflects confidence in Japan's economic recovery, supported by rising wages and inflation consistently above the 2% target for nearly three years.
Economists predict additional rate hikes in 2025, with rates potentially reaching 1% or higher to stabilize inflation and normalize monetary policy.
The yen strengthened slightly following the announcement, while Japanese government bond yields rose to multi-year highs, signaling market confidence in the BOJ's strategy.
BOJ Governor Kazuo Ueda emphasized that future rate adjustments will depend on economic and price developments, while acknowledging risks from global trade policies and market volatility.