The Bank of Japan (BOJ) has raised its short-term policy rate to “around 0.5 per cent,” the highest in 17 years, following a sharp acceleration in consumer price increases last month. This move came just hours after data showed prices rose at their fastest pace in 16 months, leaving investors cautious and triggering a stock market sell-off. BOJ Governor Kazuo Ueda hinted ahead of this hike to avoid another market shock amid US tariffs threatened by Donald Trump during the election campaign. December’s core consumer price increase of 3% from a year earlier highlighted the acceleration in inflationary pressures. This rate hike marks BOJ’s first since July and underscores its plan to steadily raise rates towards around 1%. Experts predict further hikes, with one economist suggesting another 25-basis point increase within six months, based on rising wages, inflation above 2%, and economic growth. BOJ aims to support an economy struggling with stagnant price growth since 2007, ensuring no negative interest rates remain, as people would then face fees for depositing money in banks.
Source: https://www.bbc.com/news/articles/cpqln2gwvxlo