The Bank of Japan raised its benchmark interest rate
from 0.25 per cent to 0.50 per cent, the highest in more
than a decade, after the world's second- biggest economy
expanded at the fastest pace in three years.
BoJ policy board voted 8-1 to double the overnight lending
rate from 0.25 per cent to 0.50 per cent, the bank said
in a statement in Tokyo. Deputy Governor Kazumasa Iwata
voted against the increase.
has perhaps the lowest interest rates among major economies.
The central bank said while interest-rate policy delays
could spur over-investment and asset bubbles, any further
increases would only be gradual.
governor Toshihiko Fukui told a news conference that the
central bank does not have specific schedules in mind
for future rate hikes.
higher rates may discourage investors from borrowing in
yen to buy overseas assets, the central bank has followed
an independent policy by pushing up the cost of money
at a time when many politicians have expressed concern
about the Japanese economy.
finance minister Koji Omi told parliament that he would
respect the BoJ decision. But a ruling party heavyweight,
Hidenao Nakagawa, said the BOJ would be held responsible
for its rate hike decision.
is the third time in less than a year that the Japanese
central bank raised its lending rate. In July it followed
up with a rate rise to 0.25 per cent from virtually zero,
the first rate increase in six years.
yen turned volatile, strengthening half a yen to around
119.75 per dollar just after the rate rise and then losing
all of its gains it weakened further to around
120.60 per dollar as the market digested the BoJ
comments that this could perhaps be the last hike for
interest rate at 0.50 per cent is way below benchmark
rates in the United States, at 5.25 per cent, or the euro
zone, at 3.5 per cent.
huge interest rate gap has encouraged investors to sell
yen in recent months in favor of the dollar or euro. The
yen also hit record lows against the euro and the dollar
economy is now growing at an accelerated annualised rate
4.8 per cent (October-December) - the strongest in post-war
Japan - against 0.3 per cent in the previous quarter.