On Friday, the Bank of Japan raised interest rates to the highest level since the 2008 global financial crisis and revised its inflation forecasts, emphasizing its confidence that wage growth will keep inflation at 2%, UNN reports with reference to Reuters.
This decision was the first rate hike by the Bank of Japan since July last year and was made shortly after the inauguration of US President Donald Trump, whose possible actions to raise tariffs create uncertainty for global politicians.
Bank of Japan Governor Kazuo Ueda noted that the central bank will continue to raise interest rates in response to rising wages and prices, emphasizing that there is potential for further increases in borrowing costs until they reach a level that is considered neutral for the economy.
However, he did not specify either the timing or the pace of the next hikes, emphasizing that it would depend on the speed of achieving the inflation target set by the Bank of Japan.
"We don't have any pre-established idea. We will make a decision at each meeting, looking at economic and price developments, as well as risks," he said at a press conference after the decision was made.
At its two-day meeting that ended on Friday, the Bank of Japan raised its short-term interest rate from 0.25% to 0.5%, a level Japan has not seen in 17 years. The decision was made by 8 votes to 1, with board member Toyoaki Nakamura against.
The Bank of Japan noted that "the likelihood of its forecasts being realized is increasing" as many companies plan to continue steady wage increases during this year's annual negotiations.
In its statement, the central bank said that it maintains its previous policy guidance, emphasizing its readiness to continue raising interest rates if economic and price forecasts are confirmed.
At the same time, the statement removed the reference to the need for a thorough analysis of risks associated with foreign markets and economies, which indicates confidence that the stable growth of the US economy will support the Japanese economy, at least for the time being.
"Various data show that the US economy is in good shape. Markets remain stable as the overall direction of Trump's policies becomes clearer," Ueda said.
Recall
The National Bank of Ukraine raised its key policy rate on January 24 to 14.5%, a 1% increase from the previous rate.