Bank of Japan raises rates to highest since 1995

{"text":[[{"start":11.12,"text":"The Bank of Japan has raised interest rates to a 31-year high, accelerating monetary policy normalisation under mounting pressure from Washington and joining a global fight against inflation."}],[{"start":23.08,"text":"In a margin of 7-2, the BoJ’s policy board voted for a 0.25 percentage point increase, taking its target rate to around 1.25 per cent."}],[{"start":33.8,"text":"The move announced on Friday was widely predicted by markets and comes as rising prices and a weak yen inflict pain on Japanese consumers."}],[{"start":42.76,"text":"But it failed to buoy the yen, which fell to 40-year lows against the dollar earlier this year. The Japanese currency weakened sharply after the announcement to pass ¥157 per dollar. The Nikkei 225 stock index rose 1.9 per cent."}],[{"start":58.7,"text":"“The BoJ was always going to struggle to beat market expectations since a quarter-point hike was almost fully priced in,” said Stephen Angrick, head of Asia-Pacific economics at Moody Analytics."}],[{"start":69.92,"text":"The rate rise followed similar moves by the European Central Bank and the US Federal Reserve, as monetary authorities around the world grapple with price rises triggered by the Middle East conflict and the consequences of the AI boom."}],[{"start":null,"text":"

"}],[{"start":83.04,"text":"The BoJ, which last increased rates in June, to 1 per cent, had previously indicated it planned to raise them at intervals of about six months. Its accelerated pace of tightening followed Japanese authorities’ $96bn currency market intervention in July and August to strengthen the yen, and urgings from Treasury secretary Scott Bessent to step up the pace of rate increases."}],[{"start":105.56,"text":"The bank’s commentary accompanying the decision did little to suggest the board was considering a further rate increase at its next meeting in October. Currency analysts at Nomura noted ahead of the decision that the market thought there was only a small chance of back-to-back increases."}],[{"start":121.66,"text":"Analysts noted that the two dissenting voters on the board were both appointed by Japan’s Prime Minister Sanae Takaichi, who favours reflationary government spending and has in the past been critical of tighter monetary policy."}],[{"start":134.44,"text":"Marcel Thieliant, head of Asia Pacific at Capital Economics, said that “with the two most hawkish Board members set to depart next July, the composition of the Board will probably become even more dovish”."}],[{"start":146.14,"text":"But the overall tone of the bank’s statement was still hawkish according to analysts, leaving open the possibility of at least one more rate increase by December."}],[{"start":157.12,"text":"Expectations that the central bank would play a critical role in supporting the yen had also weighed heavily on the BoJ, analysts said, as Japan wrestled with higher costs of imported energy, food and other materials."}],[{"start":null,"text":""}],[{"start":169.72,"text":"The BoJ statement repeated the concerns raised at its previous meetings that underlying inflation could push higher than the bank’s 2 per cent target as upward pressure from business-to-business transactions “started to spill over into consumer prices”."}],[{"start":185.862,"text":"The US Federal Reserve on Wednesday raised rates for the first time since 2023, to a range of 3.75 per cent to 4 per cent, stoking what traders see as a risk of a “rate hike race” between the central banks."}],[{"start":199.76,"text":"That will have consequences for the “yen carry trade”, which relies on taking advantage of cheap borrowing costs in the Japanese currency to invest in higher-yielding assets abroad."}],[{"start":210.2,"text":"The yield on Japan’s benchmark 10-year bond was little moved after the release but was still trading near 3 per cent, its highest point in three decades."}],[{"start":219.84,"text":"The ECB last week also raised rates by a quarter percentage point to 2.5 per cent, its second increase this year."}],[{"start":227.72,"text":"Comments by Bessent this month that the Japanese central bank would “do the right thing” and not allow monetary policy to fall behind the curve have heaped further scrutiny on BoJ governor Kazuo Ueda."}],[{"start":239.96,"text":"Naoto Sekiguchi, Japan economist at SMBC Nikko Securities, said in a note to clients ahead of the BoJ’s decision that it was “not realistic” to expect Ueda to give a clear outlook for rate rises at his press conference on Friday afternoon."}],[{"start":240.46,"text":"Data visualisation by Haohsiang Ko in Hong Kong"}],[{"start":263.08,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1789712932_7430.mp3"}