Japanese Key Interest Rate at Highest Level in 30 Years - Japanese Key Interest Rate at Highest Level in 30 Years
The Bank of Japan has raised its key interest rate to 0.75%—the highest level in nearly three decades. Despite the increase, the yen weakened against major global currencies. The decision marks a significant shift in the central bank’s monetary policy stance.
Governor Kazuo Ueda announced the 0.25 percentage point rise after a unanimous vote by the bank’s board. He pointed to sustained growth in core inflation, partly driven by higher food prices, as justification for the move. The benchmark rate determines how much financial institutions pay to borrow fresh funds from the central bank.
Currency analysts at Commerzbank linked the yen’s decline to the bank’s long-standing guidance on future rate hikes. Officials also indicated that further increases could follow if economic conditions develop as projected. Economist Tobias Basse of NordLB argued that the adjustment was necessary given the current price environment.
The rate now stands at its highest since 1995. The yen’s immediate weakening suggests markets had already priced in the decision. Further hikes will depend on inflation trends and economic performance in the coming months.
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