Bank of Japan declares victory in hitting price target, signals near-term hikes
It maintains its policy rate at 1.25% in a widely expected move
The Bank of Japan (BOJ) declared victory in its 14-year campaign to meet its 2% inflation target, signaling potential near-term interest rate hikes. On Friday, the BOJ maintained its policy rate at 1.25% during a meeting, but expressed confidence that underlying inflation had reached the target level and was likely to stay around there.
The central bank emphasized the need to monitor how well inflation is anchored at 2%, signaling a shift towards a more hawkish stance open to raising rates a few times over the next few months. This change aligns the BOJ with other major central banks, such as the US and European counterparts, who are also considering near-term rate hikes to combat inflationary pressures from the AI boom and the Iran war-induced energy shock.
Additionally, the BOJ announced plans to speed up the sale of exchange-traded funds (ETFs) from January, increasing its annual sales from 330 billion yen to 860 billion yen. This decision was viewed as a further indication of the central bank's confidence in the economic outlook, contrasting with its previous cautious approach to rate hikes.
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