Bank of Japan Gov. Kazuo Ueda arrives at its headquarters in Tokyo Friday, Jan. 24, 2025. (Japan Pool/Kyodo News via AP)
Tokyo, Japan — The Bank of Japan hiked interest rates on Friday to their highest level in 17 years despite fears of economic turmoil under US President Donald Trump.
The BoJ said it was increasing its benchmark borrowing rate by 25 points to 0.5 percent, its highest level since 2008 in the global financial crisis.
Article continues after this advertisementThe move followed data showing that core inflation in the world’s fourth-biggest economy accelerated to three percent in December, supporting the case to further tighten monetary policy.
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“Japan’s economic activity and prices have been developing generally in line with the Bank’s outlook, and the likelihood of realizing the outlook has been rising,” the bank said in a statement.
Article continues after this advertisementEven as other central banks have raised borrowing costs in recent years, the BoJ has remained an outlier, maintaining an ultra-loose stance in an attempt to spark growth and inflation.
Article continues after this advertisementBut it concluded last March that Japan’s “lost decades” of economic stagnation and static or falling prices were over, finally lifting rates above zero.
Article continues after this advertisementThat first hike since 2007 was followed by another in July, the second of which caught investors off guard and caused major market volatility.
This time, the BoJ has prepared markets for an increase, and around three-quarters of economists polled by Bloomberg News had predicted one.
Article continues after this advertisementThe two conditions set by BoJ chief Kazuo Ueda — wage hikes and no major volatility following Trump’s inauguration — appear to have been met.
Trump tariffsThe hike was the biggest hike since February 2007. They were cut in 2008 to deal with the impact of the global financial crisis.
The BoJ was also expected to signal more rate hikes going forward, assuming its expectations for the world’s fourth-biggest economy come to pass.
“With no market turbulence after Trump’s inauguration,” conditions for the BoJ to hike its policy rate have been met, said Ko Nakayama, chief economist of Okasan Securities Research.
“Raising just 25 basis points to 0.5 percent won’t cool the economy,” he said before the decision was announced.
There are, however, concerns among Japanese companies that Trump could throw a spanner into global trade and drive up inflation with major hikes in US import tariffs.
Japan’s economic growth also slowed between July and September, partly because of one of the fiercest typhoons in decades and warnings of a major earthquake, which did not materialize.
“The Bank of Japan is dialling back monetary policy support despite the poor run of economic data. The weak yen is a key reason,” Moody’s Analytics said in a note.
big777winData released Friday showed that headline Japanese inflation hit 3.6 percent in December, or 3.0 percent adjusted for food prices.
In an announcement Saturday, SSS said the new OIC succeeded its former president, Rolando Ledesma Macasaet, who resigned on October 3 to run for a House seat under the SSS-GSIS Pensyonado Partylist.
The aviation giant must “reset our workforce levels to align with our financial reality,” Chief Executive Kelly Ortberg said, adding that the cuts of 17,000 positions globally “will include executives, managers and employees.”
The core reading remained above the BoJ’s two-percent inflation target, which it has surpassed every month since April 2022.
Marcel Thieliant at Capital Economics said Japanese inflation was set to remain above the BoJ’s objective “for a while yet”.
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As a result “we’re sticking to our forecast that the policy rate will reach an above-consensus 1.25 percent by the end of next year”plea8, Thieliant said before Friday’s announcement.
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