The Bank of Japan increased its short-term interest rate to 0.50% last night, up from 0.25%, by a vote of 8-1. This is the highest rates have been since the 2008 financial crisis. The decision comes as the BoJ notes that “CPI inflation is likely to be at or around 2.5% for fiscal 2025” as a result of firms’ expectations “they will continue to raise wages steadily.” Consistent with these comments is an upgrade in the 2025 forecasts for CPI less fresh food by 0.5 ppts to 2.4% and CPI less fresh food and energy by 0.2 ppts to 2.1%.
