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Japan ups interest rates to 0.5% Japan ups interest rates to 0.5%
(10 minutes later)
Japan's central bank has showed signs of confidence in the country's economy, raising interest rates to 0.5%. Japan's central bank has raised interest rates to 0.5% following signs of steady growth in the economy.
It said the decision - only its second interest rate rise in more than six years - had been made because Japan's steady growth was likely to continue. It said the decision - only its second interest rate rise in more than six years - had been made because Japan's recovery was likely to continue.
Worries about the US and other overseas economies had also diminished, it said.Worries about the US and other overseas economies had also diminished, it said.
The bank had last raised the rate to 0.25% percent in July last year after six years of zero interest rates designed to help the economy recover. In July last year, the bank raised the rate to 0.25% following six years of zero interest rates designed to help the economy recover.
The bank's nine-member monetary policy board voted 8-1 in favour of the hike. Rate pause?
The yen immediately strengthened against the dollar on international currency markets when press reported hinted at the Bank's decision. The bank's nine-member monetary policy board voted 8-1 in favour of the latest rise, but said future rises would be made only gradually.
The dollar lost half a yen as investors snapped up the Japanese currency in expectation of a rate rise, but recovered after the announcement. Many economists now think that another rate rise will not come for at least another six months.
At 0528 GMT, the dollar was at 120.40 yen, up from a 119.73 low reached just after the rate decision. "It reduces the likelihood of further rate hikes going forward," according to Glenn Maguire, chief economist at SG Hong Kong.
The doubling of interest rates still leaves Japan well below the benchmark rates of 5.25% in the US and 3.5% in the eurozone.
Focus now turns to a news conference by the Bank of Japan's governor Toshihiko Fukui and the minutes from the US Federal Reserve's last rate-setting meeting.