What’s going on here? The Bank of Japan (BoJ) raised its benchmark interest rate to the highest point since 2008. What does this mean? The BoJ’s new 0.25% interest rate – up from the previous range of between 0% and 0.1% – marks a stark change from years spent in negatives. And remember, the higher the rate, the harder it is for folk and firms to access and spend money, which weighs on an economy. Layer on the fact that the central bank plans to cut its monthly government bond purchases in half by early 2026, and there should be even less cash flooding into the economy. Though even with these changes, the BoJ expects the inflation-adjusted interest rate to stay significantly below zero, so the economy hasn’t exactly been covered with a cold towel just yet. Why should I care? Zooming out: Japan wants the sale to end. Japan has been contending with falling prices for decades, due to a sluggish economy, folk stashing cash, stagnant wages, and an aging population that spends less. Although, this year has marked a turnaround, not least because Japan’s trade union secured the biggest pay bump in 33 years. And of course, higher rates are designed to put a damper on price increases, so the BOJ’s raise shows that it’s confident the country has ditched deflation. In fact, the central bank predicts that inflation – minus food and energy costs – will hang around 2% next year and the one after. The bigger picture: Tortoise, meet the hare. The BoJ has kept rates low and steady, while America’s Federal Reserve (Fed) has been on a hiking spree. And because higher rates attract investors to a country’s currency, the US dollar has been basking in glory. But if the Fed decides to cut rates in September, there’s even more reason to expect a stronger yen – so you might want to book those flights to Japan, stat. | 