The Bank of Japan surprised markets by raising its key interest rate to about 0.25% from zero to combat the yen’s decline against the U.S. dollar. The decision caused the yen to appreciate briefly but the dollar rebounded soon after.
Following the announcement, Tokyo’s share prices slipped by 0.2%. The central bank’s move aimed to address rising import prices due to a weakening yen, which has pushed inflation above the 2% target.
Despite controversy surrounding its ultra-lax monetary policy, the BOJ cited moderate inflation expectations as a reason for the rate hike. The bank had previously maintained near-zero interest rates to boost inflation and economic growth.
This shift in policy follows a recent adjustment in March, where the overnight call rate was raised to 0.1% from minus 0.1%. Meanwhile, the U.S. Federal Reserve was expected to cut rates in September, adding to the uncertain global economic outlook.
With major central banks making pivotal decisions on interest rates, the global economic landscape remains uncertain and investors are closely monitoring for any further developments.
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