The decision made by the Bank of Japan (BOJ) to raise interest rates this week was driven primarily by rising inflation risks, and further hikes could follow if price pressures continue to build, market analysts and economists said on Friday.
They noted, however, that the pros and cons of the move are yet to be seen.
The comments came after the BOJ concluded its monetary policy meeting earlier on Friday and raised the policy rate from around 1.0 percent to approximately 1.25 percent -- its second hike in three months and the highest level since 1995.
"I believe that the primary reason is still on the price front. The BOJ currently considers Japan's underlying inflation rate to be already quite close to its 2 percent target. Taking into account the situation in the Middle East, robust demand related to artificial intelligence, as well as yen depreciation and currency movements, the risk of inflation exceeding 2 percent has clearly increased. I think this should be the biggest factor behind the BOJ's decision to raise rates this time," said Ichikawa Masahiro, chief market strategist at Sumitomo Mitsui DS Asset Management.
Beyond inflation, the expert said the yen is likely to face continued depreciation pressure from multiple directions.
"Considering the instability in the Middle East and the rise in crude oil prices, I believe that these are the factors that drive buying of the U.S. dollar and selling of the yen. In addition, concerns in the market about the deterioration of Japan's fiscal status, as well as the international balance of payments structure reflected in factors such as the trade deficit, will also push the yen lower," he said.
Other experts noted that the central bank is keeping a close watch on the yen's weakness, and the pace of tightening could quicken if external risks materialize.
"Moreover, the BOJ mentioned at its press conference that if the Middle East situation keeps crude oil prices persistently elevated and pushes them even higher, It may accelerate the pace of rate hikes, continuing not only through this year but possibly into the first half of next year. The BOJ may maintain a rhythm of one rate hike every three months, raising rates further, and by around the middle of 2027, Japan's policy rate could reach 2.0 percent," said Hideo Kumano, head economist at ABC Economic Research Institute in Japan.
Inflation risks drive BOJ's rate hike: experts
Inflation risks drive BOJ's rate hike: experts
Angola's National Assembly President Adao de Almeida said his landmark visit to China, highlighted by the signing of a memorandum of understanding between the two countries' legislatures, will strengthen the two nations' comprehensive strategic cooperative partnership and deepen their traditional friendship and cooperation.
Almeida led a delegation to China from September 9 to 16 at the invitation of China's National People's Congress (NPC). He spoke about the significance of his visit in an exclusive interview with China Media Group.
"First, thank you for giving me this opportunity to speak in this interview about relations between Angola and China. This is my first visit to China as President of Angola's National Assembly at the invitation of China's National People's Congress. It is also the first visit to China by a president of Angola's National Assembly in nearly 20 years," he said.
The visit produced concrete results. On September 11, the two countries' legislatures signed a memorandum of understanding to institutionalize parliamentary exchanges and support broader bilateral relationship.
"Today [September 11], our two sides signed an important document of cooperation, the Memorandum of Understanding between the National Assembly of Angola and the National People's Congress of China. We will establish Angola-China Friendship Groups and also friendship groups of our respective legislatures and make full use of them to facilitate communication and maintain regular consultations on issues of common concern. As you know, [Chinese ] President Xi Jinping and [Angolan] President Joao Lourenco have maintained strategic communication. The memorandum will not only promote exchanges between our two legislatures, but also support our countries' diplomacy and help translate into reality the vision set out by our leaders for bilateral relations," he said.
Looking back over decades of engagement, he underscored China's role as a partner in Angola's postwar reconstruction and the importance he attaches to Chinese investment.
"Since Angola and China established diplomatic relations in 1983, our relationship has continued to move forward with the times. With the end of years of armed conflict and the restoration of peace in Angola during the 2002-2003 period, the bilateral relations deepened further. China became an important partner in Angola's postwar reconstruction, and we need to attach greater importance to Chinese investment in Angola. Our ties have now been elevated to a comprehensive strategic cooperative partnership. This visit is therefore highly significant. It has added a new dimension to bilateral relations through cooperation between our legislatures, while further deepening the traditional friendship and cooperation between our two countries," he said.
Angola lies on the southwestern coast of Africa, bordering the Republic of the Congo and the Democratic Republic of the Congo to the north, Zambia to the east and Namibia to the south, with the Atlantic Ocean to its west. Endowed with fertile land, a network of rivers and rich fishery resources, the country relies on oil and diamond mining as pillars of its national economy.
China and Angola established diplomatic relations in 1983, and elevated their ties to a comprehensive strategic cooperative partnership in 2024.
Angola's parliament president eyes deeper friendship, cooperation with China
