Bank of Japan hikes interest rates amid inflation optimism

Japan’s central bank raised rates as expected, but cast a hawkish inflation outlook for the world’s third-biggest economy, bolstering the country’s currency and stocks.

The Bank of Japan projected prices to rise faster than previously expected both this year and next, a significant long-term shift in a country that for decades grappled with deflation and flat-to-moribund growth.

The forecast prompted traders to bring forward expectations of subsequent rate increases, with ING saying one could come as soon as May, potentially putting Japanese interest rates at their highest level in nearly 30 years.

Still, the bank noted, risks remain, including US trade policy under President Donald Trump.