Japan’s Central Bank Picks Up Pace of Tightening With Rate Hike - wsj.com

Japan’s central bank has raised interest rates again, signaling a faster pace of monetary tightening than markets had anticipated. The move reflects the Bank of Japan’s growing confidence that domestic inflation and wage growth are becoming durable enough to justify stepping away from years of ultra-loose policy. For much of the past decade, Japan was the outlier among major economies, keeping borrowing costs near zero while others raised rates aggressively.

The decision matters well beyond Japan. Higher Japanese yields can influence global bond markets, particularly U.S. Treasuries, because Japanese investors are major buyers of overseas debt. A stronger yen and rising domestic yields may also shift hedging costs and capital flows, with ripple effects for currencies and equities. Markets will now watch the BOJ’s guidance for how quickly further increases might come, and whether wage negotiations and inflation data continue to support the tightening path.