The Bank of Japan believes that the core inflation rate is still rising moderately and that the price trends are basically consistent with the outlook targets for the second half of the year. Although the nominal interest rate has been raised, the central bank expects the real interest rate to remain significantly in negative territory, which means that the overall financial environment remains relatively loose. Governor Kazuo Ueda will hold a press conference around 2:30 PM Beijing time to further explain the considerations behind this decision and the future interest rate path.

The Bank of Japan announced on Friday a 25 basis point increase in interest rates, raising the uncollateralized overnight call rate to 0.75%, the highest level since 1995.

This decision was announced after a two-day policy meeting and was approved with a unanimous vote of 9:0, fully in line with market expectations. All 50 economists surveyed predicted that the Bank of Japan would take action to raise interest rates this time, marking the first occurrence of a unanimous expectation of “all members betting on a rate hike” during Governor Kazuo Ueda's tenure.