The Bank of Japan (BoJ) raised its benchmark interest rate from the previous range of 0% to 0.1% to “around 0.25%.”
In addition, it laid out a strategy for winding down its enormous bond-buying program as it steps back from ten years of stimulus measures.
The action was taken only hours before the US Federal Reserve is scheduled to make its most recent interest rate announcement. On Thursday, the Bank of England is also anticipated to make an announcement.
Stefan Angrick reports that the rate increase was unanimously expected following the announcement of the decision by domestic media on Tuesday night.
But the move sits uncomfortably with a poor run of economic data and lack of demand-driven inflation.”
Official figures showed Japan’s economy shrank by an annualised 2.9% in January to March, while consumer prices rose by a less-than-expected 2.6% in June from a year earlier.
“Despite sluggish consumer spending, monetary officials sent a decisive signal by raising interest rates and allowing for more gradual balance sheet reduction,” said Frederic Neumann, Chief Asia Economist at HSBC.
“Barring major disruptions, the BoJ is on course to tighten further, with another interest hike by the start of next year,” he added.
