In recent events, Reuters mentioned that the Bank of Japan (BOJ) is expected to increase interest rates to record-high levels in the last 17 years when US President-elect Donal Trump takes office. This move will lift the borrowing cost in Japan to record high levels since the 2008 financial crisis.
A policy tightening would highlight the central bank’s determination to gradually raise interest rates from the current 0.25% to around 1%, a level analysts consider neutral for Japan’s economy—neither slowing it down nor overheating it. At the two-day meeting concluding on Friday, the BOJ is expected to increase its short-term policy rate to 0.5%, barring significant disruptions in financial markets caused by Trump’s inaugural speech or executive orders.
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Although the BOJ refrained from raising rates at its December 18-19 meeting, hawkish board member Naoki Tamura advocated for an increase, with some colleagues also noting favourable conditions for an imminent rate hike, according to meeting minutes. With policy tightening this week considered almost certain, market focus is now on Ueda’s post-meeting briefing for insights into the timing and pace of future rate hikes.
