Bank of Japan lifts rate to 31-year high as it pivots to managing inflation risks - The Globe and Mail

The Bank of Japan raised its policy rate to a 31-year high, marking another step away from the ultra-loose monetary stance it maintained for years. According to The Globe and Mail, the move reflects a pivot toward managing inflation risks rather than solely supporting growth — a notable shift for a central bank long associated with aggressive easing.

For markets, the decision matters because the yen has been a key funding currency for global carry trades, where investors borrow cheaply in yen to buy higher-yielding assets. Higher Japanese rates can gradually change those incentives, with potential ripple effects across currency, bond and equity markets worldwide. Japanese government bond yields may also respond as the central bank's footprint in bond markets evolves.

What to watch: the pace of future increases, the BOJ's guidance on inflation and wage growth, and how the yen and global bond yields react. The direction of travel appears to be normalization, but the speed and extent remain uncertain — a distinction that matters for anyone assessing cross-asset risk.