Bank of Japan Interest Rate Decision: The Bank of Japan on Friday (December 19) hiked the interest rates to a three-decade high. As widely expected, BOJ
raised the short-term interest rates to 0.75 per cent, up by 25 bps from 0.5 per cent. The move underscored the central bank's conviction that Japan was on course to stably hit its 2 per cent inflation target backed by wage gains, and ready for a continued normalisation of monetary policy, said a Reuters report. "Real interest rates are expected to remain significantly negative after the policy change, and accommodative financial conditions will continue to firmly support economic activity," the BOJ said in a statement announcing the decision. The decision to hike the benchmark rate was announced after a two-day meeting of the central bank concluded today. This also marks the first increase since January.
The latest hike take rates to levels unseen since 1995, when Japan was reeling from the burst of an asset-inflated bubble that drew the BOJ into a prolonged battle with deflation.
BoJ: 'Will Continue To Hike Rates'
The statement by Bank of Japan said that it will continue to hike the interest rates in the near future. "Given that real interest rates are at significantly low levels, the BOJ will continue to raise interest rates and adjust the degree of monetary accommodation" if its economic and price forecasts materialise, the central bank said in the statement.
A Reuters poll had earlier showed 90 per cent of economists expect the BOJ to hike rates to 0.75 per cent in December and slightly over two-thirds saw rates reaching at least 1 per cent by September next year.
The BOJ's decision comes a day after the European Central Bank kept policy steady and signaled an end to its rate-cut cycle.
Japan Inflation Rate
Bank of Japan ended a decade-long, massive stimulus last year and raised rates twice including to 0.5 per cent from 0.25 per cent in January on the view Japan was on the cusp of durably achieving its 2 per cent inflation target. Data released on Friday showed core consumer inflation hit 3 per cent in November, steady from the previous month and well exceeding the BOJ's target.
Meanwhile, the Nikkei 225 index, which tracks to movements of Japan's top 225 companies, traded 645 points or 1.32 per cent higher at 49,622 after the session resumed after the lunch break.
