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Bank of Japan increases base rate for the first time in 17 years

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Bank moves in response to wage rises

Last week, the Bank of Japan raised its key interest rate to a range of 0.0%-0.1% from -0.1%. The move comes after increases in consumer prices have led to wage rises.

Official figures in Japan show that the core consumer inflation remained at the bank’s target of 2% for January. However, due to rising cost of living, the biggest companies in Japan agreed to a 5.28% salary increase earlier this month. This move triggered the bank’s decision to raise the base rate.

Whether the increase will directly affect your business will likely depend on whether it trades with Japan. However, interest rate changes can have an indirect effect on all businesses to the extent that they affect global economic conditions and so influence demand or shifts in consumer behaviour.

At this stage it is interesting to note that Japan was the last country to still have a negative interest rate – a negative base rate means that people have to pay to deposit money in a bank and so encourages people to spend their money instead. This indicates that nowhere in the world is immune to rising costs and inflation, and suggests that businesses need to continue to plan for rising costs in order to stay profitable.

See: https://www.bbc.co.uk/news/business-68594141

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