TOKYO, Dec. 19 (Xinhua) -- The Bank of Japan (BOJ) on Friday raised its benchmark interest rate by 25 basis points to 0.75 percent, its highest level in three decades, and left the door open for more hikes.
At the end of its two-day monetary policy meeting, all nine policy board members, including Governor Kazuo Ueda, voted for the rate hike.
The move marks the first rate hike since January and also the first under the administration of Prime Minister Sanae Takaichi, who advocated an aggressive fiscal policy and monetary easing.
In a statement released after the meeting explaining the decision, the BOJ said the likelihood of realizing its baseline inflation scenario that underlying inflation will be consistent with its 2 percent target has been rising.
"While uncertainties remain regarding the U.S. economy and the impact of trade policies, these uncertainties have declined," the statement said. As long as economic activity and prices continued to improve, it added, the bank would "continue to raise the policy interest rate and adjust the degree of monetary accommodation."
At a press conference following the rate hike, Ueda said the 0.75 percent is still a little "far from the bottom" of its estimated neutral range, he said, adding that it is difficult to provide specific neutral interest rate levels in advance.
As for the pace of future rate increases, Ueda said the bank will examine the impact of each hike on the economy and prices and decide accordingly.
Following the rate increase decision, the yen briefly weakened to the lower 156 range, while the yield on the benchmark 10-year Japanese government bond rose to 2.02 percent, the highest level since August 1999.
The rate hike is part of the central bank's latest step towards monetary normalization after the BOJ ended its negative interest rate policy in March 2024. The central bank raised its policy rate in July 2024 and again in January.
Since Takaichi took office, the yen has sharply depreciated amid concerns that her expansionary policy would further deteriorate Japan's fiscal health, prompting the selling of the currency and government bonds.
Market expectations for further rate hikes have intensified as Japan continues to grapple with persistent inflation and negative real interest rates. ■
