The Bank of Japan (BoJ) has decided to lift its policy interest rate to 0.75%. This move is seen as a crucial step for the Japanese central bank, indicating a shift from the longstanding super-low interest rates to tackle ongoing economic challenges. The timing and scale of the rate hike are likely to have substantial impacts on financial markets, both domestically and globally. Stakeholders await further details and guidance from the BoJ around the implementation and implications of this change.

Interest rates in Japan have long been kept at ultra-low levels in an effort to spur economic growth and overcome deflation ー a trend that has persisted for almost two decades. While this allowed for robust borrowing opportunities, concerns over potentially adverse effects such as asset bubbles have grown. Public opinion on such monetary decisions is diverse, with views typically straddling between approvingits potential to boost economic activities and worrying over increased interest burden on borrowers.

In comparison, countries in the US and EU have already begun to raise their interest rates from the near-zero levels maintained during the COVID-19 pandemic. These steps are taken to curb inflation and stabilize their economies despite the associated risks of slowing down economic recovery.