Bank of Japan's Landmark Interest Rate Hike Sparks Global Market Turmoil

The Bank of Japan's recent interest rate hike to 0.25%, its highest in 15 years, is sparking significant market turbulence. Discussions indicate further rate increases could be in store. The surprise decision and BOJ Governor Kazuo Ueda's comments on potential hikes have intensified global market instability and impacted the yen.

The Bank of Japan's landmark decision to raise interest rates last month has contributed to global market turmoil, according to a summary of the discussion revealed on Thursday. Policymakers at the BOJ discussed the possibility of further hikes, indicating a hawkish shift in their strategy, the summary noted.

During the unexpected move on July 31, the central bank increased its short-term policy target to 0.25% from a zero-to-0.1% range—its highest level in 15 years. BOJ Governor Kazuo Ueda's subsequent comments suggested the potential for additional rate hikes, coinciding with indications that the Federal Reserve might cut U.S. rates, exacerbating market turbulence and impacting the yen.

The BOJ's nine-member board debated the risk posed by rising import costs and steady wage increases, which might push inflation higher than expected. This growing concern within the board members was supported by calls for the adjustment of monetary accommodation even after July's hike, should companies continue to raise prices, wages, and capital spending.

(With inputs from agencies.)