Japan Raises Interest Rates for Second Time Since 2007

For only the second time in nearly two decades, Japan’s central bank on Wednesday raised interest rates, a move that could help bolster the country’s ailing currency and ease the burden of consumers paying more for imported essentials like food and energy.

The Japanese central bank increased its target policy rate to 0.25percent, up from a range of zero to 0.1 percent. The rate was last bumped up in March, when the bank raised interest rates for the first time since 2007.

The large gap between interest rates in Japan and the United States has caused the yen to fall in value against the dollar over the past two years, but it regained some strength recently as traders anticipated an imminent rate increase from the Bank of Japan.

The Bank of Japan’s decision was being closely watched by investors and economists inside and outside of Japan. There are indications that the slack yen is holding back the spending power of Japanese consumers, and Japan’s economy, the world’s fourth largest, has shrunk in two of the past three quarters.

With inflation having exceeded policymakers’ target of 2 percent for more than two years, analysts and economists widely expected at least one additional rate increase this year. But the increase to 0.25 percent announced Wednesday was a particularly notable departure for the Bank of Japan.

In a statement, the bank said economic activity and prices had generally developed in line with its previous forecasts, though it flagged rising import prices as a risk. If trends continue, it said would continue to raise interest rates.