Following the Bank of Japan's decision to raise interest rates to 0.5%, Chris Scicluna, Head of Research at Daiwa Capital Markets Europe, provides his insights.
Chris Scicluna, Head of Research at Daiwa Capital Markets Europe: "The Bank of Japan’s decision to raise its policy rate to 0.5% marks a historic shift, underscoring its determination to steer Japan out of decades of ultra-low interest rates. This is the highest since 2008, reflecting an environment where inflation has proven persistent, thanks in part to a mix of rising rice and oil prices, and yen weakness. While the rate hike itself was well-telegraphed, its real significance lies in the Bank signalling that Japan's economy, buoyed by solid corporate profits and wage growth, might finally be ready to join the global club of normalised monetary policy.
“The BoJ has signalled that it wants to push rates higher still, to levels that we have not seen in Japan since 1995. So, it is approaching uncharted waters: the BOJ has embarked on a journey that will test how far it can go without unsettling the nation’s fragile consumption or broader financial stability."