So the BOJ has increased by 0.25% as major organizations predicted earlier

For more than 30 years, the Japanese economy has lived in an environment of cheap money and deflation. The BOJ understands very well that if it raises interest rates too quickly, the shock will not be in the financial markets, but in the corporate and domestic consumption sectors – entities that have become accustomed to capital costs close to 0. Therefore, this move should be understood as an attempt to balance rather than the beginning of a real tightening cycle.

*The pressure forcing the BOJ to act comes from two sides.

- One is that inflation has exceeded the 2% target for nearly four consecutive years, something that has not happened in many decades.

- Two is that the yen continues to weaken against the USD, reflecting that carry trade is still operating strongly.

=> If it continues to keep interest rates too low, Japan will face imported inflation and the risk of losing control of long-term price expectations. But if it raises too quickly, they will be shooting themselves in the foot. Therefore, the only choice is to raise slowly, raise slightly, and communicate extremely softly (BOJ Governor repeatedly states that this is normal)

- The projected 1% interest rate by 2026 is very high compared to Japan, but if it occurs, it is still extremely low compared to the global average. The real risk arises if inflation accelerates again or wages do not maintain their upward momentum, forcing the BOJ to change its stance.