February 12, 2025
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The Bank of Japan affirmed its confidence that growing wages will keep inflation stable around its 2 percent target on Friday by raising interest rates to their highest level since the global financial crisis of 2008 and updating its inflation projections.

The decision, which is the first rate increase since July of last year, was made only days after US President Donald Trump took office. Trump is expected to keep international politicians on guard against the possible fallout from threatened higher tariffs.

The yen gained strength and yields on Japanese government bonds reached new multi-year highs on Friday, following the Bank of Japan’s anticipated interest rate hike and an increase in its inflation projections, which increased expectations that rates would rise once more.

While pay increases were becoming more widespread and integrated across businesses, BOJ Governor Kazuo Ueda stated at a press conference that the weakening yen was still driving up import prices.

Regarding when to raise interest rates next, he stated, “We have no set idea.” The BOJ will decide at each meeting based on the data available at the moment.

During its two-day meeting that ended Friday, the BOJ increased its short-term policy rate from 0.25 percent to 0.5%, which is the highest level Japan has seen in 17 years. With board member Toyoaki Nakamura voting against it, the decision was made by an 8-1 majority.

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