More detail on Bank of Japan decision to raise rates by 25bp to the highest in 30 years

Bank of Japan's Rate Hike Decision

The Bank of Japan (BoJ) raised its policy rate by 25 basis points to 0.75%, reaching its highest level in around 30 years. This move was widely anticipated in the market, and the decision was approved unanimously by the policymakers. The central bank indicated a conditional openness to further tightening, depending on economic and price forecasts.

Economic and Inflation Outlook

Despite the hike, BoJ officials emphasized that monetary conditions remain accommodative, stating that real interest rates will remain significantly negative even post-adjustment. The move is framed as part of a gradual and cautious process. Internal dissent regarding the inflation outlook among board members suggests ongoing concerns about Japan's path to sustained price stability.

Future Prospects

Market reactions were muted as the rate increase was fully priced in, limiting immediate volatility in the yen and JGB markets. Moving forward, attention will be on further guidance from the BoJ, wage trends, and the sustainability of inflation heading into the mid-2020s. Overall, the message indicates a commitment to cautious normalization without a preset path for further increases.