Rather than celebrating the Bank of Japan’s interest rate hike on Friday, the highest level in three decades, as a milestone comeback for an economy that has wrestled with deflation and sluggish growth for a generation, Gov. Kazuo Ueda would prefer that you focus on how low rates still are.
So much so that the bank indicated there’s plenty of scope for additional increases.
Much depends on his next move and how quickly he does it. It’s true that borrowing costs, even after four increases since early last year, remain very low relative to other large economies. Friday’s lift took the main rate to 0.75%. The gap is especially big with the U.S., which has often been cited as a source of weakness for the yen. Ueda is reluctant to call the hikes a tightening; he emphasizes that policy remains accommodative.
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