The Bank of Japan raised interest rates on Friday, marking a shift away from its ultra-loose monetary policy that has been in place for over a decade. The move was widely expected by markets and follows a trend of tightening monetary policy by other major central banks around the world. The Japanese Yen has strengthened against the US Dollar following the announcement.
With markets anticipating an interest rate hike by the Bank of Japan (BoJ) on Friday, the head of Rengo, Japan's largest national trade union center, stated on Wednesday that he concurs with the BoJ's assessment of wage hike momentum in various Japanese regions. However, specific details regarding this momentum were not provided. Despite these seemingly hawkish developments, USD/JPY is trading 0.14% higher on the day at 155.70 as of this writing.
The Bank of Japan (BoJ) is Japan's central bank, responsible for setting monetary policy within the country. Its primary objectives are issuing banknotes and implementing currency and monetary controls to ensure price stability, aiming for an inflation target of approximately 2%. For over a decade, the BoJ has pursued an ultra-loose monetary policy since 2013, designed to invigorate the economy and combat persistently low inflation. This policy, known as Quantitative and Qualitative Easing (QQE), involves the central bank printing money to purchase assets such as government or corporate bonds, thereby injecting liquidity into the financial system.In 2016, the BoJ further escalated its efforts by implementing negative interest rates and directly controlling the yield on its 10-year government bonds. This strategy aimed to stimulate lending and investment, ultimately driving economic growth. However, in March 2024, the BoJ shifted its stance, raising interest rates and effectively moving away from its ultra-loose monetary policy. This decision was driven by several factors, including rising inflation in Japan, exceeding the BoJ's 2% target, and increasing pressure to align Japanese monetary policy with global trends. The BoJ's decision to unwind its ultra-loose policy is expected to have significant implications for the Japanese Yen, potentially leading to appreciation against major currencies
BANK OF JAPAN INTEREST RATES YEN MONETARY POLICY JAPANESE ECONOMY
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