Japan’s central bank raised its policy rate to 1.25%, exceeding 1% for the first time in 31 years, in an attempt to tackle persistent inflation pressures.
Two bank board members voted against the increase and urged caution. Their stance has lowered investors’ expectations of new aggressive steps in the near future.
Core inflation in Japan is stable and close to the bank’s 2% target, with companies continuing to pass on increased costs of wages and raw materials to consumer prices of goods and services.
The move puts Japan in line with other central banks around the world grappling with inflation caused by soaring energy prices. Even after the increase, Japan’s rate remains much lower than that of the European Central Bank (2.5%) and the US Federal Reserve (3.75-4.00%).
An increase in the discount rate by leading central banks (the Federal Reserve, the Bank of Japan, the ECB) will significantly complicate the further reduction of the discount rate in Israel.