The Bank of Japan made a historic move on Tuesday by hiking its benchmark interest rate for the first time in 17 years, signaling a shift away from its longstanding negative rate policy. This decision, which was widely anticipated, saw the BOJ raise its overnight call rate to a range of 0 to 0.1%, up from minus 0.1%.
The BOJ cited indicators such as wage increases and inflation stabilizing above its 2% target as reasons for the rate hike. However, the central bank also noted “extremely high uncertainties” including weakness in industrial production, exports, housing investment, and government spending.
Despite this significant development, market reaction was relatively muted. In Asia, Tokyo’s Nikkei 225 index rose 0.7% while Chinese markets saw declines. Hong Kong’s Hang Seng index lost 1.2% and the Shanghai Composite index dropped 0.7%. In Seoul, the Kospi fell 1.1% while Australia’s S&P/ASX 200 added 0.4%.
Meanwhile, in the U.S., stocks rose ahead of a busy week for central banks globally. The Federal Reserve is set to announce its decision on interest rates on Wednesday, with expectations for the central bank to hold rates steady. However, recent reports on inflation may impact the Fed’s forecast for rate cuts this year.
On Wall Street, the S&P 500 added 0.6% while the Dow Jones Industrial Average rose 0.2%. Tech stocks like Nvidia and Tesla saw gains, while Hertz Global Holdings and Boeing faced losses.
In other news, U.S. benchmark crude oil prices dipped slightly, and the euro slipped against the dollar. Overall, the global markets are closely watching central bank decisions and economic indicators for further insights into the future direction of the economy.
