Bank of Japan raises rates to highest in 17 years

Published On Jan 23, 2025, 10:52 PM

The Bank of Japan has increased its short-term policy interest rate to 0.5%, the highest in 17 years, in an effort to control rising prices. This decision follows the latest economic data that indicated pricing pressures, with core consumer prices rising by 3% in December. The bank's governor aimed to signal the rate hike in advance to prevent market disruption, which occurred after a previous hike in July that surprised investors and caused a stock market downturn. This decision comes amid rising corporate wages in Japan as companies respond to the higher cost of living.

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Rising interest rates generally strengthen a country's currency as they offer better returns on investments denominated in that currency. In Japan's case, this move could lead to a stronger yen. However, the immediate reaction could cause volatility in markets and affect investor sentiment towards Japanese equities.

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