Bank of Japan Raises Interest Rates to Curb Yen's Slide

The Bank of Japan raised its key interest rate to about 0.25% to curb the yen's slide against the U.S. dollar. Despite this move, Tokyo's share prices slipped slightly. The hike aims to combat inflation and rising import prices in Japan. The bank aims to strike a balance without stifling economic growth.

The Bank of Japan raised its key interest rate to about 0.25% from zero to curb the yen's slide against the U.S. dollar. This widely anticipated move caused the yen to gain sharply against the dollar prior to the decision.

However, share prices in Tokyo dipped 0.2% to 38,463.18 following the announcement. For years, the central bank has kept interest rates near or below zero to spur inflation and sustain growth, a strategy that has been controversial due to its mixed results.

The bank justified the rate hike by citing rising inflation and a weak yen, which has pushed prices higher for imported goods. While the ultra-lax monetary policy involved massive government bond purchases, the bank has begun unwinding this stance cautiously to avoid stifling growth. The Federal Reserve and the Bank of England were also poised for key rate decisions later in the day.

(With inputs from agencies.)