Japan's central bank has made a significant policy shift by raising its benchmark interest rate for the first time in 17 years. The Bank of Japan's lending rate for overnight borrowing by banks has been increased to a range of 0 to 0.1% from the previous minus 0.1%. This move marks the first rate hike since February 2007 and signifies a departure from the negative interest rate policy that aimed to stimulate the economy.
The decision to raise interest rates comes as the Bank of Japan Governor highlighted that the negative interest rate policy, along with other monetary measures, has played its role in supporting the economy. The bank has set a 2% inflation target to combat deflationary tendencies and has observed a positive trend in wages and prices, indicating a gradual economic improvement.
