The Bank of Japan has raised its key interest rate to 0.75%, the highest level in more than 30 years, marking a decisive break from the country’s long-running ultra-loose monetary policy. The move confirms Japan’s full exit from negative interest rates, which had been used for years to combat deflation and chronically weak inflation.
Financial markets reacted swiftly. Japanese equities climbed by around 1%, reflecting optimism about economic normalization, while the yen weakened against the U.S. dollar as investors adjusted rate expectations. At the same time, yields on Japanese government bonds surged.
Notably, the yield on long-dated JGBs approached 2% for the first time in nearly two decades, signaling a structural shift in Japan’s bond market. Analysts say the decision underscores growing confidence in sustainable inflation and wage growth.
