The Bank of Japan Hiked Rates for the First Time in 17 Years

No Longer Negative

While investors are anxiously awaiting the first interest rate cut by the Federal Reserve, the Bank of Japan just delivered very different news: For the first time in 17 years, the central bank raised interest rates.

Inflation has been a primary concern for American policymakers, companies, and consumers for several years now. Japan has faced the opposite problem for decades. Its central bank has battled deflationary tendencies since before the turn of the century, and hasn’t raised benchmark rates since 2007 — until now.

After years of negative interest rates intended to stimulate Japan’s economy, the Bank of Japan (BOJ) has raised rates from -0.1% to a range of 0%-0.1%. This might not sound like much, but it’s a major shift in the country’s policy.

Inflation Increase

America’s Federal Reserve raised its benchmark interest rate at an historic pace in an attempt to bring inflation down to 2%. Japan also faced a tough road to reach its own 2% target rate — but it was coming at it from the opposite direction: deflation. The country’s economy has struggled to grow since the early 1990s.

Japan’s most closely watched inflation metric showed prices increased 3.5% year-over-year in January, following a 3.7% increase in December. This, alongside accompanying wage increases, played a significant role in the BOJ’s decision to hike rates. The thinking is this: If people make more, they spend more, spurring price increases and economic growth.

Market Reaction

Japan’s Nikkei stock index finished higher, Japanese bond yields fell, and the Japanese yen dropped to a four-month low in value against the U.S. dollar.

Looking for more stories like this? Check out On the Money — SoFi’s one-stop-shop for news, trends, and tips!

Check it out

Please understand that this information provided is general in nature and shouldn’t be construed as a recommendation or solicitation of any products offered by SoFi’s affiliates and subsidiaries. In addition, this information is by no means meant to provide investment or financial advice, nor is it intended to serve as the basis for any investment decision or recommendation to buy or sell any asset. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. These links are provided for informational purposes and should not be viewed as an endorsement. No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this content.
Communication of SoFi Wealth LLC an SEC Registered Investment Advisor
SoFi isn’t recommending and is not affiliated with the brands or companies displayed. Brands displayed neither endorse or sponsor this article. Third party trademarks and service marks referenced are property of their respective owners.
SOSS24032002