The Bank of Japan Hikes Interest Rates

The Bank of Japan (BoJ) has raised its benchmark interest rate to approximately 0.25%, up from the previous range of 0% to 0.1%. This move underscores the central bank's commitment to normalizing its monetary policy. Alongside this rate hike, the BoJ has announced plans to reduce its monthly bond purchases to around ¥3 trillion ($19.9 billion) by the first quarter of 2026, halving the recent pace of purchases.

Governor Kazuo Ueda indicated that future rate hikes would be data-dependent, emphasizing the need to monitor the effects of the current and past increases. The BoJ's decision reflects a significant shift from its previous ultra-easy monetary policy, which included the world’s last negative interest rate until recently.

Following the announcement, the yen appreciated by over 1.5% against the dollar, Japanese equities advanced, and the banking sector saw nearly a 5% surge.