※The image from https://www.boj.or.jp
On 27 January 2025, the Bank of Japan decided to raise its key interest rate from 0.25% to 0.5%. This interest rate is the same as it was 17 years ago. In this section, I’d like to talk about the cause of this and predictions in the private sphere.
There are mainly two reasons.
- Controlling inflation
- Preparing for Second Trump administration
Controlling inflation
As you know, rapid inflation is a serious problem for developed countries. Japan is also too.The table below shows the inflation in Japan in 2001 from 2023.
As you can see, Inflation in 2022 and 2023 exceeds 2.5%, which is a major blow in Japan, where prices have not risen for a long time. Especially, the retail of rice prices is more serious than the other. In January 2024, the retail of rices prices was 2168 yen per 5kg. In December, the prices was grown 3679 yen per 5kg. That is an increase of approximately 1.7 times. This is a major blow to the Japanese, for whom rice is a staple food.
※ The data from here.
Preparing for second Trump administration
※This image is from pixabay
In January 2025, Donald Trump is inaugurated as the 47th President of the United States of America. He calls himself a “Tariff Man” and is determined to pursue a policy that puts his country first. Also, He signed many presidential decrees and shocked the world. There are examples below.
- Withdrawal from the World Health Organisation
- Re-withdrawal from the Paris Agreement.
- Review of the ‘place of birth’ system. etc…
In addition, he has been tried to actively intervene with the Federal Reserve Bank (USA) and have a significant impact on US monetary policy. As the future of the US financial system becomes more uncertain, I believe that the government has taken a stabilising measure by raising the Japanese policy rate and closing the gap with the US policy rate.
I think this decision will affect those things.
- Rising variable interest rates on mortgages
- Variable interest rate increases for loan-based scholarships
| The Bank of Japan Official Website. | https://www.boj.or.jp |
| NHK | https://www3.nhk.or.jp/news/html/20250124/k10014702081000.html |
| Rice market prices in Japan | https://www.jpmarket-conditions.com/1002 |
Thank you for reading at the end.
