Japan raises interest rates to the highest level in 17 years

With high inflation and the largest increase in interest in almost two decades, Banco do Japan advances in economic normalization and challenges stability in global markets

Banco do Japan has raised short -term interest rates to “about 0.5%”, in an anticipated decision that advances the “normalization” of the country’s monetary policy.

According to the Financial Times, the central bank’s decision, approved by 8 votes to 1, to increase 0.25% rates raised the basic interest rate to its highest level by 17 years. The measure occurred after weeks of speculation about whether Governor Kazuo Ueda would postpone the decision until there were more solid evidence of wage increase in Japan and sustainable inflation.

Iene, who had been valued in relation to the dollar in the weeks preceding the Bank of Japan meeting, remained stable on Friday. However, Traders said they were “prepared for anything” when Ueda holds her press conference in the afternoon.

The previous increase in rates by the Japan Bank in July, which surprised most analysts, triggered a period of extreme volatility in exchange markets and actions.

Several hours before the closing of the two-day meeting of Banco do Japan on Friday, a report from the Ministry of Internal Affairs showed that consumer prices in Japan rose 3% in December compared to the previous year.

Growth, driven in part by cutting government subsidies to energy and partly at the high prices of rice, marked the largest annual rate of inflation in 16 months.