In a move that sent ripples through global markets, the Bank of Japan (BOJ) announced on Friday that it would hold its benchmark interest rate steady at 0.25%. This decision, which defied predictions from economists who anticipated a rate hike by the end of the year, has significant implications for Japan’s economy and the yen’s value.
The BOJ’s decision to maintain rates aligns with its recent stance, outlined by Governor Kazuo Ueda last month. He indicated that the central bank would only consider raising interest rates if the economy and inflation met projections. This contrasts with the actions of other major central banks, including the US Federal Reserve, which recently cut interest rates by 50 basis points.
The BOJ’s decision to hold rates comes after a period of near-zero interest rates, a policy implemented to stimulate inflation and economic growth. However, in July, the BOJ raised rates to 0.25% in an attempt to achieve its 2% inflation target.
Following the announcement, the yen remained relatively stable, hovering around 142.52 against the dollar. Meanwhile, the Nikkei 225 index, which had seen a 2% increase earlier in the day, held onto its gains.
The BOJ’s decision to hold rates steady despite the market’s expectation of a hike signals the bank’s cautious approach to monetary policy. As the global economic landscape continues to evolve, the BOJ’s next move will be closely watched by market participants.
