BOJ raised its short-term interest rate target to 0.75%, the highest level since 1995, with the decision approved unanimously. Despite the hike, the BOJ stressed that real interest rates will remain significantly negative.
The central bank said Japan’s economy is recovering moderately, with tight labor markets and strong corporate profits. Wages and inflation are expected to rise gradually, while overall economic growth should remain moderate.
BOJ reaffirmed it will continue raising rates if growth and inflation move in line with forecasts, aiming to sustainably achieve the 2% inflation target. Markets reacted with Nikkei futures up ~0.8%, while USD/JPY pared gains after the decision.