Japan Stocks Surge as Bank of Japan Raises Interest Rates to 30-Year High

Japan’s financial markets reacted sharply on Thursday after the Bank of Japan raised its benchmark policy rate to its highest level in decades, signaling a stronger stance against persistent inflation. The move lifted Japanese stocks and pushed government bond yields higher as investors reassessed the country’s monetary direction after years of ultra-loose policy.

The central bank increased rates by 25 basis points to 0.75%, marking the highest level since 1995 and aligning with expectations from economists surveyed by Reuters. The decision comes as inflation has remained above the BOJ’s target for nearly four years, despite signs of gradual easing in recent months.

Market reaction was swift. Japan’s benchmark Nikkei 225 climbed 1.03% to close at 49,507.21, while the broader Topix gained 0.8%. Bond markets also felt the impact, with yields on the 10-year Japanese government bond rising above 2% for the first time since 1999. Meanwhile, the yen weakened slightly against the U.S. dollar, reflecting ongoing currency pressures.

Analysts say government concerns over currency depreciation played a key role in supporting higher rates. Ken Matsumoto, Japan macro strategist at Credit Agricole-CIB, noted that authorities may step in if the yen weakens sharply during the low-liquidity year-end holiday period, signaling a readiness to stabilize the currency through intervention if needed.

Across the broader Asia-Pacific region, markets mostly followed Japan’s upbeat tone. South Korea’s Kospi and Kosdaq both advanced, while Australia, Hong Kong, mainland China, and India posted modest gains. The positive sentiment was further supported by overnight strength on Wall Street, where U.S. stocks rebounded on softer inflation data and renewed optimism around future rate cuts.

source: cnbc