Japan Hikes Interest Rates to 30-Year High While India and US Cut Rates

In a significant move, the Bank of Japan (BOJ) has raised its short-term interest rates, pushing them to the highest level in three decades. The central bank increased rates from 0.5% to 0.75%, a level last seen in 1995, during the aftermath of Japan’s asset bubble burst. This marks a major step towards normalizing monetary policy after decades of ultra-low borrowing costs.

The BOJ indicated that rates could rise further beyond next year if economic conditions continue to support inflation targets. “Even after this policy change, real interest rates are expected to remain significantly negative, and accommodative financial conditions will continue to strongly support economic activity,” the bank stated.

This decision comes at a time when other major economies, including India and the United States, have recently cut interest rates to boost growth. Japan, the world’s fifth-largest economy, is witnessing steady progress toward its 2% inflation target, fueled by rising wages. The central bank views this as an opportune moment to gradually tighten monetary policy while maintaining support for the economy.

Economists note that this rate hike signals a shift in Japan’s decades-long monetary stance and underscores the country’s growing confidence in its economic recovery.