What to know about possible impact of Japan's rate hike
Tokyo (AP): The Bank of Japan raised its key policy rate to a 30-year high on Friday in a widely anticipated move that could rattle world markets.
The two-day BOJ policy meeting wrapped up with the 0.25 per cent hike in its benchmark short-term rate. That took the policy rate to 0.75 per cent, its highest level since September 1995.
In a statement, the central bank said the decision was unanimous and that it expected to raise rates further if there are no major changes in the outlook for the economy.
The 0.75 per cent rate is still low by most standards, but the BOJ has kept that rate near or below zero for years, trying to pull the economy out of a deflationary funk. Since the pandemic, most other central banks, like the US Federal Reserve, have raised rates to counter spiking inflation and then begun cutting them to help their slowing economies recover momentum.
Japan's own economy contracted at a 2.3 per cent annual rate in the last quarter, but improved business sentiment and price pressures have led the BOJ to relent and raise rates. Here are some things to know about its decision.
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Japan's interest rates rise while other countries' fall
Since Japan's economic bubble burst in the early 1990s, the central bank has kept borrowing costs low to encourage more spending by businesses and consumers.
Lower interest rates have also helped the central bank manage the country's massive national debt, which amounts to nearly triple the size of the economy.
As Japan's population has aged and begun declining, its economy has slowed and that led to deflation, or falling prices due to weak demand. Even with cheap credit, investment has lagged, stunting economic growth.
In early 2013, the central bank launched what was dubbed a “big bazooka” of monetary easing, cutting interest rates and purchasing government bonds and other securities to help channel more money into the economy.
When the COVID-19 pandemic struck, the benchmark interest rate was at minus 0.1 per cent. The BOJ only began raising it in 2024, the first hike in 17 years, after inflation stabilised above its target of about 2 per cent.
A weaker Japanese yen has pushed inflation higher
The Japanese yen has weakened against the US dollar and many other major currencies. That has raised the cost, in yen terms, of imported food, fuel and other items needed to keep the world's fourth largest economy running.
The strong appetite for investing in dollar-denominated shares of companies linked to the artificial intelligence boom has also pulled money out of the yen and into dollars.
So inflation has risen faster than wages, squeezing household budgets and raising costs for businesses.
Higher interest rates are expected to raise the value of the yen against the dollar as investments flow into Japan seeking higher yen-denominated yields. Friday's move would signal the central bank's intention of continuing to “normalise” its monetary policy with further rate hikes next year.
“The BOJ's stance towards rate hikes reflects the fact that inflation is becoming entrenched," Kei Fujimoto, a senior economist at SuMi Trust, said in a commentary. “If drivers such as a further depreciation of the yen accelerate inflation going forward, it is possible that the pace of rate hikes will also increase accordingly.”
The dollar is worth about 156 Japanese yen, nearly twice its level in 2012 and near its highest level this year.
World markets are bracing for impact
Even small changes in interest rates can have a big impact on markets. A rate hike in Japan would undermine an investment strategy known as the “carry trade.” That involves investors borrowing cheaply in yen and then using that money to invest in higher paying assets elsewhere.
Any such major shift is likely to reverberate across world markets. Carry trades are lucrative when stocks and other investments are climbing, but losses can snowball when many traders face pressure to sell stocks or other assets all at once.
A rate hike also is expected to crimp demand for other assets, including cryptocurrencies. Reports last week that the BOJ would go ahead and raise rates caused the price of bitcoin, for example, to drop below USD 86,000. The original cryptocurrency had bolted to record highs near USD 125,000 in early October.
Risks for Japan
Judging the timing and scale of changes to interest rates and other monetary policies are the biggest challenge for central banks, given the time it takes for such moves to ripple throughout the real economy and financial markets.
Like the Federal Reserve, Japan's central bank struggles to balance the need to boost business activity and create jobs with the imperative of containing inflation.
The BOJ held off on raising rates earlier given uncertainties over how US President Donald Trump's tariffs might hit automakers and other exporters. A deal setting US duties on imports from Japan at 15 per cent, down from the earlier plan for a 25 per cent rate, has helped ease those concerns.
BOJ Gov. Kazuo Ueda has indicated he believes wages will continue to rise in Japan as companies compete for a shrinking pool of workers, helping to support growth.
Market watchers will be watching closely to see what Ueda says Friday about the outlook for future rate increases.
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Gurugram Police arrest BJP Yuva Morcha member for spreading fake murder story on social media
New Delhi: Gurugram Police have arrested BJP Yuva Morcha member Hariom Mishra, for allegedly spreading a fabricated and communally sensitive story on social media about the murder of a college student in Gurugram.
Mishra who is also known as Shaurya Mishra had shared a collage of four photographs on his X handle earlier this month. He claimed that a 24-year-old college student, identified as Nikita Agarwal, had been murdered by her classmate Arif Khan in Gurugram. In the post, he alleged that the woman was blackmailed, forced into prostitution, gangraped, and eventually killed. He also claimed that Arif dumped her body in a forest. The claims were presented as being based on police sources.
The post went viral and garnering over 1.5 lakh views, and was amplified by several right-wing social media handles across X, Facebook and Instagram. A verification of the claims revealed that no such incident had taken place in Gurugram. A search of credible news reports showed no record of any such murder. The police said this news would have inevitably attracted media attention if it were true.
On December 11, Gurugram Police publicly refuted the claims through their official X handle. They stated that the information which was being circulated was completely false. The police warned that legal action would be taken against those spreading misinformation. Despite the warning, Mishra neither deleted the post nor issued any clarification.
Police in Gurugram confirmed Mishra's arrest on December 16. The police said a FIR was filed after he continued to spread false information about the alleged murder of a Hindu woman by Muslim man. Police said Mishra, a resident of Uttar Pradesh's Kaushambi district, is now being investigated.
Gurugram Police spokesperson Sandeep Singh told The Print that the accused had deliberately misrepresented facts and used objectionable content to spread hatred along religious lines. “Such posts can create serious disturbances in society, and the police take these matters very seriously,” he said.
A reverse image search conducted by fact-checkers at Alt News, revealed that the photographs used in the viral post were unrelated to the claims, while two of the images were traced to a Pinterest account belonging to influencer Maulik Chopra and another image was sourced from an Instagram post by influencer Shivam Thakur featuring a woman named Deepanshi Rawat. The fourth image was found on an unrelated Instagram page. The images depicted different individuals and had no connection to any crime.
Police said they are also investigating Mishra’s motive behind sharing the false and provocative content.
