Tokyo, Japan - July 31, 2024

The decision made by the Bank of Japan (BOJ) Wednesday to raise interest rates and cut back on government bond purchases could have impact on indebted households and small and medium-sized enterprises, said an economist later the same day.

The BOJ has decided to raise its policy rate to 0.25 percent from the previous range of zero to 0.1 percent, which was set when the BOJ ended its negative interest rate policy in March.

The second policy rate hike this year, which was announced after a two-day monetary policy meeting, marked the first "additional rate hike" since February 2007, national broadcaster NHK reported.

Saisuke Sakai, chief economist of Mizuho Research and Technologies, said that the police rate hike may have an impact on household savings and corporate borrowing rates in Japan to some extent.

The Japanese central bank also decided to halve its monthly government bond purchases to 3 trillion yen (about 20 billion U.S. dollars) from around 6 trillion yen by March 2026, in a further shift toward policy normalization on the backdrop of a weakening yen.

Regarding the future direction of Japan's financial policy and economic development, Sakai said that the trend of yen depreciation might be curbed, entering a phase of slow appreciation. However, due to insufficient economic recovery in Japan, the rate of interest rate hikes and yen appreciation is likely to be relatively slow, he added.

Shotlist:
Tokyo, Japan - July 31, 2024:
1. Japanese national flag;
2. Building of Bank of Japan;
3. Sign of Bank of Japan;
FILE: Tokyo, Japan - June 16, 2022
4. Various of signs reading "Bank of Japan";
Tokyo, Japan - July 31, 2024
5. SOUNDBITE (Japanese) Saisuke Sakai, chief economist, Mizuho Research and Technologies (partially overlaid with shots 6-7):
"The Bank of Japan has raised the policy rate to 0.25 percent. Although a 0.25-percent rate hike is not substantial, it will have a certain negative impact on households with mortgages or on indebted businesses, especially small and medium-sized enterprises. However, due to the relatively small rate hike, the overall impact on the economy won't be significant. If the policy rate is raised to 1 percent or higher in the future, this could lead to a tightening of monetary policy, thereby increasing the number of affected groups.";
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FILE: Tokyo, Japan - Date Unknown
6. Various of Japanese yen banknotes going through counting machine;
FILE: Tokyo, Japan - 2024
7. Aerial shots of cityscape, traffic
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FILE: Tokyo, Japan - Date Unknown
8. Various of traffic, pedestrians at crossroad;
Tokyo, Japan - July 31, 2024
9. SOUNDBITE (Japanese) Saisuke Sakai, chief economist, Mizuho Research and Technologies (partially overlaid with shot 10):
"I believe there is a high possibility of another rate hike within the year, between October and December, raising the current policy rate by another 0.25 percent. Following the recent rate hike by the Bank of Japan, a period of high market volatility is expected. I think the pace of yen appreciation may gradually slow down afterward.";
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FILE: Tokyo, Japan - Date Unknown
10. Various of Japanese yen banknotes on counter;
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FILE: Japan - Date Unknown
11. Various of pedestrians.

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