The move was widely expected, and the yen advanced sharply against the dollar ahead of and after Wednesday’s decision, trading below 152 yen
The Bank of Japan raised its key interest rate Wednesday to around 0.25% from a range of zero to almost 0.1%, acting to curb the yen’s decline against the U.S. dollar.
The move was widely expected, and the yen advanced sharply against the dollar ahead of and after Wednesday’s decision, trading below 152 yen. Concerns have been deepening about the yen’s recent decline to 160-yen levels to the dollar. That hurts an economy that imports almost all its oil, as well as other items such as food.
The decision on the overnight call rate came just four months after the central bank raised its key rate above zero for the first time in 17 years.
BoJ Governor Kazuo Ueda told reporters the action came because the foundation of the Japanese economy was relatively solid, with gradual price rises accompanied by wage increases, despite concerns about personal spending holding up as prices increased.
He acknowledged additional rate hikes may be coming within this year, depending on how the economy holds up, including how the latest rate hikes may affect economic activity and prices. He refused to give a specific date.
In the long term, we think that adjusting longtime extremely low interest rates should not be rushed, and overall risks can be reduced, he added.
Share prices in Tokyo advanced after the decision, with Japan’s benchmark Nikkei 225 closing 1.5% higher.
Japan’s central bank has kept interest rates near or below zero for almost a decade, seeking to spur inflation in what has been a deflationary economy, hoping to sustain stronger growth for one of the world’s biggest economies.
Ueda said Wednesday that he did not want to come out and say that Japan had escaped deflation, but he stressed that prices appeared to be steadily rising.
