The Bank of Japan, after clearly signalling last week's interest rate hike, may return to its accustomed fuzzy guidance about central bank policy to maintain flexibility when it eventually begins to consider how much tightening is enough.

The Bank of Japan raised interest rates on Friday to their highest since the 2008 global financial crisis and revised up its inflation forecasts, underscoring its confidence that rising wages will keep inflation stable around its 2% target.

The Bank of Japan has raised short-term interest rates by a quarter point, the highest in 17 years, signalling efforts to normalise monetary policy in response to persistent inflation and increasing wages.

The BOJ fumbled its communication in December, surprising investors, but then telegraphed Friday's increase so unambiguously that the rate hike was 90% priced in.

The Bank of Japan, after clearly signalling last week's interest rate hike, may return to its accustomed fuzzy guidance about central bank policy to maintain flexibility when it eventually begins to consider how much tightening is enough.

Giving explicit advance signals, in addition to making the Bank of Japan feel boxed in, could breach Japanese law stipulating the nine-member board must debate and sign off on rate decisions at each policy meeting.

Moody's Analytics Stefan Angrick explains that imported inflation has been stickier-than-anticipated contributing to the Bank of Japan's moderate rate hike pace.

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Backdrop: Japan had been mired in decades of weak prices and economic stagnation, and even as inflation impacted the globe in the aftermath of the COVID pandemic, BOJ policymakers largely viewed local price pressures as imported from elsewhere.

The Bank of Japan delivered a widely expected 25 basis point hike to its key lending rate on Friday, bringing the overnight call rate to the highest since 2008 and putting pressure on the dollar. The ICE Dollar Index slipped 0.

The Bank of Japan (BOJ) raised its key interest rate to about 0.5% from 0.25% on Friday, noting that inflation is holding at a desirable target level. “The economy is gradually recovering ...