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Bank of Japan Raises Interest Rates to 17-Year High Amid Inflation Surge. Japan’s central bank raised interest rates to "around 0.5%" as December's inflation soared to a 16-month high. Core consumer prices rose 3% year-on-year in December, prompting the BOJ to tighten monetary policy. Governor Kazuo Ueda pre-announced the rate hike to prevent the surprises that rattled markets after July's decision. The decision aligns with Japan’s economic conditions but comes amid Donald Trump's tariff threats on imports. Higher rates now allow the BOJ room to cut them later if economic stimulation becomes necessary. The bank plans to increase rates to approximately 1%, aiming for a neutral stance that neither accelerates nor slows growth. Analysts expect another 25-basis-point increase within six months, citing sustained inflation and wage growth. Japan’s earlier hikes marked the end of negative interest rates globally, a policy used to boost spending over savings.
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