Economic conditions & trends

Bank of Japan Lifts Rate to 1.25%, a 31-Year High

Is this the bare minimum to stop the yen's slide or a blow to households already crushed by prices?

5 hours ago·Updated 1 hour ago

Bank of Japan Lifts Rate to 1.25%, a 31-Year High

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Above: Bank of Japan Governor Kazuo Ueda at the central bank's headquarters in Tokyo, Japan, on Sept. 18. Image credit: Akio Kon/Bloomberg/Getty Images

The Spin

Narrative A

Letting the yen slide forever would have locked in higher import costs and convinced markets that Japan will always tolerate currency weakness. A move to 1.25% is the bare minimum, and the immediate yen selloff proves the rate gap is still too wide to ignore. Delay only means harsher hikes later, because time is getting more expensive by the day.

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Narrative B

Squeezing mortgage holders and small businesses with higher borrowing costs does nothing for families already crushed by soaring energy and food prices. Core inflation is slowing to 1.7%, so this hike is about defending the currency and pleasing Washington. Raising rates while consumers pull back spending will not deliver wage growth.

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