The Bank of Japan (BOJ) Breaks Free: Rate Hike to 0.75% Signals End of Zero-Interest Era!

Policy Shift Explained

In a closely watched decision, the BOJ adjusted the policy rate higher, reflecting confidence in Japan's path toward 2% inflation stability. Governor Kazuo Ueda emphasized data-dependent flexibility, balancing yen weakness and global uncertainties. Markets reacted with a yen rally and Nikkei dip.

Key Highlights

Rate Adjustment: Short-term rate target lifted to 0.75%, first above 0.5% since 2008, ending decades of ultra-loose policy.

Inflation Outlook: Core CPI expected at 2.5% for FY2025, driven by robust wages exceeding 3% gains.

Bond Purchases: Scaled back JGB buys to ¥3 trillion monthly, signaling quantitative tightening.

Economic Projections: GDP growth revised to 1.2%, with unemployment steady at 2.5%; no recession fears.

Global Ripples

This move pressures other central banks and boosts carry trade unwinds, eyeing USD/JPY below 140.

Sources: Bank of Japan official statement, Reuters, Bloomberg reports