The Bank of Japan has increased its lending rate to its highest level since 1999, as per a Reuters report. The update has sent the country’s bond prices up above 2%, the highest they’ve ever been since 1995.
The rate cut was widely expected.
“Judging from recent data and surveys, there is a high chance the mechanism in which wages and inflation rise moderately in tandem will be sustained,” said the Bank of Japan in an official statement.
Short-term interest rates were raised to 0.75% from 0.5%. Gains held steady on the Nikkei stock exchange.
All yields for bonds went up, with the two-year yield—considered especially sensitive to monetary policy expectations—going up by 2.5% to 1.085%. The five-year yield went up to 1.475%. The 20-year yield went up to 2.965%. Finally, the 30-year yield went up to 3.4%.
The move stands out in stark contrast to the U.S., which has opted to cut the federal funds rate, with Federal Chair Jerome Powell indicating it’s unlikely they will go up in the future.