Bank of Japan raises rates to highest since 1995 - Financial Times

The Bank of Japan has raised its policy rate to a level not seen since 1995, according to the Financial Times. The move marks another step away from the ultra-loose monetary stance that defined Japanese policy for decades, when near-zero and negative rates were used to fight persistent deflation.

For global markets, the decision matters because Japan has long been a source of inexpensive funding. Higher domestic rates can shift the incentives for Japanese investors who have allocated capital abroad in search of yield, with potential ripple effects on bond markets, currency pairs and carry trades. A stronger yen could also alter the competitive picture for Japanese exporters.

What to watch now is the pace of further normalization. The Bank of Japan has historically moved cautiously, citing fragile growth and the need for durable inflation. Investors will focus on upcoming policy statements and wage and price data for signals on whether this is a one-off adjustment or the start of a longer tightening cycle.