Bank of Japan Raises Key Interest Rate Amid Yen's Slide

The Bank of Japan raised its key interest rate to 0.25% from a range of 0-0.1% to curb the yen's depreciation against the US dollar. This decision, driven by concerns over the yen's drop impacting import costs, marks the second hike in four months and hints at potential future rate increases.

The Bank of Japan raised its key interest rate on Wednesday to about 0.25% from a range of zero to 0.1%, acting to curb the yen's slide against the US dollar.

The move was widely expected, and the yen gained sharply against the dollar, trading below 152 yen. Concerns have been deepening about the yen's recent drop to 160-yen levels to the dollar. This decline adversely affects an economy that imports most of its oil and other essentials like food.

Bank of Japan Gov. Kazuo Ueda indicated that the foundation of the Japanese economy is relatively solid, with gradual price rises accompanied by wage increases. He also hinted at additional rate hikes within the year if the economy requires it. Share prices in Tokyo rose, with Japan's benchmark Nikkei 225 finishing 1.5% higher.

Japan's central bank has maintained near-zero interest rates for close to a decade to spur inflation and sustain growth. However, the recent policy shift indicates a cautious unwinding of ultra-lax measures without disrupting the fragile economic recovery.