JAPAN'S CENTRAL BANK OFFICIALLY RAISES INTEREST RATES – A STRONG SIGNAL FOR GLOBAL CASH FLOW
The Bank of Japan (BoJ) has just raised interest rates by 0.25% to 0.75%, the highest level in over 30 years. This decision reflects a fundamental shift in the economic context of Japan.
Inflation has exceeded the 2% target for 44 consecutive months, with November reaching 2.9%, while the yen remains weak around 154–157 JPY/USD. Nevertheless, the BoJ emphasizes that real interest rates are still negative: the nominal interest rate of 0.75% is lower than the inflation rate, meaning that monetary policy has not yet truly tightened.
This approach aims to:
– Encourage consumption instead of holding cash
– Maintain business investment
– Support the positive loop between wage increases – consumption – growth
The BoJ expects the trend of wage increases to continue next year, following a strong increase in 2025. More importantly, the market believes this is not yet the stopping point, with the possibility of the BoJ raising rates again in 2026, bringing the interest rate close to 1%.
For the global financial market, every move of the BoJ has a significant impact on yen carry trade, capital flows, and risky assets.
