Japan: Central Bank Raises Key Rate
Industrial production in the world's fourth largest economy fell 3.6% in June
On Wednesday, July 31, Japan’s central bank announced another 0.25 percent increase in the benchmark rate. According to analysts, the regulator’s decision reflects growing concerns about the yen’s weakness. Markets had anticipated this hit, and it has pushed the Japanese currency higher in recent days.
This is the second key rate hike by the Bank of Japan in 2024. The previous one, on March 19, ended a long season of negative rates.
In addition to the prime rate hike, the central institute also announced “a plan to gradually reduce Japanese government bond purchases,” which will gradually decline from 6000 billion yen ($39.97 billion) to 3000 billion yen ($19.98 billion) per month by the first quarter of 2026.
The prime rate hike followed disappointing data on a contraction in industrial production in the world’s fourth-largest economy, which fell 3.6% month-on-month in June, which is a negative but “better” figure than market forecasts, which on average expected a 4.8 percent contraction.