BOJ hikes interest rate

The Bank of Japan (BOJ) has raised its uncollateralized overnight call rate to 0.25% from a range of 0-0.10%, signaling confidence in economic recovery and addressing concerns over a weakening yen. This decision, made by a 7-2 vote, is part of a broader strategy that includes reducing monthly outright purchases of Japanese government bonds (JGBs) to approximately JPY 3 trillion by Q1 2026. The BOJ's new economic projections reflect a cautious outlook, with fiscal 2024 growth and core CPI forecasts adjusted downward, while fiscal 2025 core CPI is slightly raised. The central bank's review indicates a shift away from the deflationary mindset that has persisted for decades, suggesting that Japan is ready for higher rates. Governor Kazuo Ueda's review aims to justify future rate hikes as inflation remains above 2%, driven by external factors and changing consumer behavior. This strategic pivot marks the end of aggressive monetary easing initiated by former governor Haruhiko Kuroda.