🇯🇵 The Bank of Japan Raises Interest Rates by 0.25 Percentage Points to the Highest Level in 30 Years

🔸 Inflation in Japan has exceeded the Bank of Japan's 2% target for 44 consecutive months, with November inflation at 2.9%, while the yen remains weak, fluctuating around 154 to 157 yen per USD.

🔸 The Bank of Japan states that real interest rates are still negative, meaning that nominal interest rates after subtracting inflation are below 0%. Therefore, monetary policy remains generally supportive of the economy. Currently, the nominal interest rate is 0.75% while inflation is at 2.9%, so savers are still experiencing a loss of purchasing power. This encourages consumers to spend and businesses to continue investing rather than holding cash.

🔸 The bank expects companies to continue raising wages in the coming year after a strong wage increase in 2025, thereby maintaining a positive cycle between income and consumption.

🔸 This rate hike was anticipated by the market, and investors estimate that the Bank of Japan will raise rates once more in 2026, bringing the interest rate to around 1%.
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