Bank of Japan's Interest Rate Hike Amid Inflation Stability

The Bank of Japan raised its key interest rate to 0.5% to maintain inflation at its target, signaling potential further hikes. This shift moves away from the previous negative rate policy and highlights better wage growth in Japan. The decision contrasts with rate cuts by US and European central banks.

The Bank of Japan has raised its key interest rate to 0.5%, stepping away from its long-standing ultra-lax monetary policy. This decision came at the conclusion of a two-day policy board meeting and aims to maintain inflation at a stable 2% target. Governor Kazuo Ueda is expected to provide more insights into the move.

Recent data demonstrate that Japanese workers are experiencing wage growth, with upcoming union negotiations likely resulting in higher pay raises. While the central bank hinted at future rate increases, it underscored the importance of being cautious to ensure economic stability.

The policy shift is a departure from the trend seen in the United States and Europe, where central banks are moving towards lowering interest rates. The Bank of Japan's actions, following an initial rate hike last year, position it distinctively in the global monetary landscape.

(With inputs from agencies.)