Japan’s Rate Hike Gamble: A Risky Bet for Global Markets

The Bank of Japan’s recent decision to raise its benchmark policy rate by 25 basis points to 0.5%—a 17-year high—signals an uncharacteristic confidence in the strength of Japan’s economy and its capacity to withstand further rate hikes. The accompanying statement reflected a bullish outlook, seemingly at odds with the mixed signals the BoJ has sent to markets in recent months regarding its policy stance. This shift in tone raises the risk of a policy misstep, which could significantly impact global markets.