The Bank of Japan is expected to raise interest rates on Friday, marking the first hike since July last year and lifting borrowing costs to levels unseen since the 2008 global financial crisis. The move would steady interest rates at near 1%, a level analysts see as neither cooling nor overheating Japan’s economy.
According to sources, the BOJ is likely to raise its short-term policy rate to 0.5% from 0.25%. This tightening in policy would underscore the central bank’s resolve to push up interest rates, now at 0.25%.
The decision comes after a series of clear signals from Governor Kazuo Ueda and his deputy last week that a rate hike was on the cards. Inflation has exceeded the BOJ’s 2% target for nearly three years, and the weak yen has kept import costs elevated.
Market attention is shifting to Ueda’s post-meeting briefing for clues on the timing and pace of subsequent increases. Analysts expect policymakers will stress their resolve to continue raising interest rates, but there is also caution due to the potential impact of Donald Trump’s policies and domestic political uncertainty.
The BOJ raised interest rates once before in 2007, which triggered a storm of criticism as it delayed ending deflation. Since then, the central bank has taken various unconventional steps to keep borrowing costs stuck near zero. The decision will be closely watched for its potential impact on Japan’s economy and markets.
Source: https://www.reuters.com/markets/asia/bank-japan-poised-raise-rates-highest-17-years-2025-01-20