Haciyev Reşit 
The Bank of Japan (BOJ) has taken a notable step in monetary policy after many years. The bank raised its short-term policy interest rate by 25 basis points to 0.75%. This decision lifted interest rates in Japan to their highest level since 1995 and signaled a gradual exit from the ultra-loose monetary policy that has been in place for decades. The move is being closely monitored not only for its implications for the Japanese economy, but also for its potential effects on global risk appetite, exchange rates, and capital flows.
Why Did the Bank of Japan Raise Interest Rates?
Behind the BOJ’s decision lies an inflation outlook supported by wage growth. The central bank emphasized that confidence has strengthened recently that inflation will sustainably reach its 2% target. Ongoing tightness in the labor market, broadly based wage increases, and strong corporate profitability all point to persistent inflationary pressures. These developments are seen as key factors supporting the BOJ’s long-delayed steps toward normalizing monetary policy.
At its meeting on Friday, the Bank of Japan unanimously raised the short-term policy rate from 0.50% to 0.75%. This marked the first rate hike since January and sent a clear message of a gradual exit from years of ultra-loose monetary policy. According to experts, the decision represents the beginning of a new era for the Japanese economy.
BOJ Statement: Emphasis on Inflation and Real Interest Rates
In its official statement, the BOJ noted that financial conditions are expected to remain accommodative despite the rate hike:
“Even after the policy change, real interest rates are expected to remain significantly negative, and accommodative financial conditions are expected to continue to strongly support economic activity.”
— Bank of Japan
This statement was interpreted by markets as a signal that tightening will remain controlled and cautious.
Will Rate Hikes Continue?
The central bank stated clearly that further rate increases could follow if economic growth and price developments evolve in line with its projections. While acknowledging certain fragilities, the BOJ noted that the Japanese economy is undergoing a gradual recovery, with domestic demand and wage growth continuing to support inflation. Analysts expect the BOJ’s next steps to be shaped by incoming economic data.
The decision has implications beyond Japan, with the potential to influence global financial markets. Possible movements in the yen, Asian equity markets, and global bond markets are being closely watched. Experts suggest that Japan’s shift toward monetary policy normalization could affect global liquidity conditions over the medium term.
Assessment
The Bank of Japan’s decision to raise interest rates by 25 basis points to 0.75% stands out as a historic turning point for the country’s economy. Reaching the highest interest rate level in 30 years signals a more determined stance in the fight against inflation. In the period ahead, Japan’s interest rate policy will continue to be closely monitored alongside inflation data, wage growth, and global economic developments.
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