The U.S. Federal Reserve (Fed) has dropped a significant economic bombshell by deciding to hike interest rates for the first time in over three years. The decision has global implications due to the interconnected nature of world economies. The move, that could impact Japan’s economy, is seen as a countermeasure against inflation and a sign of confidence in the U.S. economy's recovery from the COVID-19 pandemic.

Interest rate changes in the United States can have a direct and substantial impact on the Japanese economy due to the level of economic interdependence between the two countries. Japanese investors watch closely, as these rates influence the strength of the yen against the dollar. A strong yen could negatively affect Japan's exporting businesses and the stock market.

Straight comparisons between Japan and the U.S. or EU are challenging due to their distinct monetary policies. Where the Federal Reserve operates in a dual economic mandate, the Bank of Japan's primary objective is price stability, while the European Central Bank targets a harmonious monetary policy for its member states.