At the Monetary Policy Meeting held today, the Bank of Japan decided, by a 8-1 majority vote, to raise the uncollateralized overnight call rate from 0.25% to 0.5 %
” With regard to the future course of monetary policy, the Bank will adjust the level of interest rates gradually in the light of developments in economic activity and prices, while maintaining the accommodative financial conditions ensuing from very low interest rates for some time.”
Translation
Interest rate hikes - depends on growth expectations
Conclusion
The gap in the inflation indices and the lending rate in Japan was commented upon recently. Japan does not have much of a choice - but to raise interest rates to bridge this gap. But it does tread with caution. ( reasons are explained in the link within the paragraph )
Japan has been reluctant to act and was looking for some consumption growth before trying to bridge this gap.
Last week Japan had reported an annualised 4.8% growth for Q4 2006 - as compared to a 0.3% annualised growth in Q3 2006.
This triggered the change in stance.