As the Federal Reserve has repeatedly pushed up U.S. interest rates in an effort to tame rampant inflation, virtually every major central bank in the world has scrambled to keep up the pace. And then there’s the Bank of Japan.
The yen is in free fall. Inflation by some measures is the highest in decades. And conventional wisdom says that a rate increase could ease both problems. But the Bank of Japan — never one to follow the crowd — has remained steadfastly committed to its ultralow interest rates, arguing that making money more expensive now would only suppress already weak demand and set back a fragile economic recovery from the pandemic.
Prime Minister Fumio Kishida voiced strong support this week for the Bank of Japan’s monetary policy, even as the yen fell to a 32-year low against the dollar, a plunge that has contributed to price increases in a country unaccustomed to them and put more pressure on his unpopular administration.