BoJ Lifts Rates to 17-Year High, Consumer Inflation Accelerates In December

Akira Ito
24 Jan, 2025
Tokyo

Stock market indexes in Tokyo lacked direction in Friday's trading after the Bank of Japan raised rates as expected. 

The Nikkei 2225 stock average and the TOPIX decreased after investors reviewed the latest inflation update. 

 

BoJ Hikes Rates to Highest Since 2008 

The Bank of Japan raised its short-term rates by 25 basis points to 0.5%, the third increase in rates since the central bank ended its negative rate policy in March 2024.

The rate-setting committee approved increasing rates in an 8-1 vote, confirming strong support for the rate action. 

The central bank also signaled additional rate hikes and indicated that policymakers are ready to reduce monetary support to the economy.

The central bank also raised its core inflation outlook to 2.7% from its previous outlook of 2.5% in October and to 2.4% in fiscal 2025 and 2.0% in fiscal 2026. 

Policymakers lowered their fiscal 2024 GDP growth outlook to 0.5% from the previous estimate of 0.6%, but the central bank held its growth estimate for fiscal 2025 at 1.1% and for fiscal 2026 at 1.0%. 

The Japanese yen edged lower to 155.68 against the U.S. dollar after the Bank of Japan raised its policy rates. 

 

Consumer Price Inflation Accelerated Second Month In December 

Consumer price inflation accelerated to 3.6% in December from 2.9% in the previous month, according to the estimate released by the Ministry of Internal Affairs & Communications on Friday. 

The consumer price inflation advanced at the fastest pace since January 2023, driven by a 6.4% jump in food prices.

Higher costs of housing, transportation, and recreation also added to the upward price pressures. 

The core rate of inflation, which excludes energy prices only, rose to a 16-moth high of 3.0% from 2.7% in November.  

 

Japan Stock Movers

The Nikkei 225 Stock Average decreased by 0.07% to 39,931.98, and the broader TOPIX decreased 0.03% to 2,751.04. 

For the week, the Nikkei 225 stock average rose 2.8%, and the TOPIX advanced 1.7%.

Sumitomo Mitsui Financial Group declined 0.5% to ¥3,750.0, Mitsubishi UFJ Financial Group was unchanged at ¥1,907.0, and Mizuho Financial Group added 0.8% to ¥3,986.0.