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The Bank of Japan (BOJ) raised its main interest rate from -0.1% to between 0% and 0.1%. In 2016, the BOJ made the rate less than zero to help Japan’s economy.
The decision to raise rates depended on big companies increasing their workers’ wages to deal with the higher cost of living. Recently, Japan’s biggest companies agreed to increase wages by 5.28%, the largest increase in over 30 years. Wages had not increased since the late 1990s as prices rose very slowly or even fell.
The BOJ said there won’t be more rate increases for now. With inflation slowing down, it’s likely that workers will ask for smaller wage increases next year.
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Discussion
What do you think about The Bank of Japan's decision?
In your opinion, is 5.28% wage increase good enough for employees working in big companies?
Would you say this is an accurate forecast, "With inflation slowing down, it’s likely that workers will ask for smaller wage increases next year."?
Has the general response to this decision among the Japanese been positive or negative? Explain your answer.
What is the potential impact of Japan's interest rate hike on other countries?