TOKYO: The Bank of Japan increased interest rates on Friday to their highest in 17 years and signalled more hikes to come, sending the yen higher against the dollar.
The well-flagged 25-basis-point rise to 0.5 per cent comes as data indicates the Japanese economy is developing in line with BoJ expectations and follows another bumper inflation reading.
The move, which leaves borrowing costs at the highest since 2008, was also underpinned by “steadily” rising wages and financial markets being “stable on the whole”, the BoJ said in a statement.
“Japan’s economic activity and prices have been developing generally in line with the Bank’s outlook, and the likelihood of realising the outlook has been rising,” it said. If its outlook is met, “the bank will accordingly continue to raise the policy interest rate and adjust the degree of monetary accommodation”, it added.
BoJ chief Kazuo Ueda told a news conference that the pace and timing of future hikes was yet to be determined. “We would like to make a decision after we have studied the impact of this rate hike,” he said.
The hawkish comments sent the yen up as much as 0.7 per cent against the dollar to 154.84 yen. Even as other central banks have raised borrowing costs in recent years -- and started cutting again in 2024 -- the BoJ has remained an outlier.