The Bank of Japan decided in its meeting that ended this morning, Friday, December 24, to change its monetary policy as expected, as the bank’s members voted by a majority of 8-1 to raise interest rates by 25 basis points to reach 0.50%, the highest levels since the global financial crisis in October 2008, while member Toyoaki Nakamura preferred to keep interest rates unchanged.
The bank’s monetary policy statement stated that economic activity and prices in Japan are developing in line with the expectations contained in the previous forecast report, and core inflation excluding fresh food prices is expected to range between 2.5% and 3% in 2024 and to reach 2.5% in 2025 due to expectations of higher import prices resulting from factors such as the depreciation of the yen.
The future of monetary policy depends on developments in economic activity and prices. Given that interest rates are already very low, if the economic activity and price expectations in the January forecast are realized, the bank will continue to raise interest rates until interest rates stabilize at the bank’s target of 2% in a sustainable manner. The bank maintained its growth forecast for the Japanese economy at 1.1% in 2025, the same as the October forecast, while raising its inflation forecast for the current year to 2.4% for core inflation excluding food prices from 1.9% in the October forecast and to 2% in 2026.
30/01/2025
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