Photo/Illutration The Bank of Japan’s head office in Tokyo’s Chuo Ward (Asahi Shimbun file photo)

The Bank of Japan Policy Board decided to hike a key interest rate at its meeting on Jan. 24, the first such increase since July.

The central bank raised the target for the uncollateralized overnight call rate, a rate commercial banks charge on loans to each other, to about 0.5 percent from the current target of about 0.25 percent.

The last time a 0.5-percent target has been in place was in October 2008.

The increase will likely lead to hikes in the interest rates on corporate loans as well as the variable and fixed interest rates on housing loans.

At a news conference after the Policy Board meeting, BOJ Governor Kazuo Ueda indicated that further rate hikes were possible if economic trends moved in the direction forecasted by the central bank.

“With the economy and consumer prices proceeding in a trend we expected, the possibility has increased that the future will also move according to our expectations,” he said.

BOJ officials, including Ueda, have signaled in the last few days that a hike was in the works, citing growing momentum toward another wage hike in this spring’s “shunto” labor negotiations.

BOJ officials were also focused on what economic policy course would be set by U.S. President Donald Trump in his inaugural address on Jan. 20. The absence of major moves on financial markets gave BOJ officials the added confidence to proceed with a rate hike.

The comments by Ueda and other central bank officials were likely intended to avoid a repeat of market reaction to the BOJ’s decision in July to raise the call rate.

That decision was considered a surprise by market players and led to a sudden increase in the value of the yen against the dollar as well as a record decrease in the Nikkei 225 index of the Tokyo Stock Exchange.

To avoid similar confusion, BOJ officials made it clear in recent days that another rate hike was likely imminent.

In March, the BOJ ended its 11-year, ultra-loose monetary policy and lifted the negative interest rate policy, which marked its first interest rate hike in 17 years.

In July, the central bank raised the call rate target to about 0.25 percent from about 0-0.1 percent.

However, the BOJ has maintained that target in three consecutive Policy Board meetings until December.

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