The return of inflation and wage growth is giving the Bank of Japan room to raise interest rates and declare the end of a long period of stagnation.

Despite limited developments that would justify a policy shift since December, Japan's central bank nevertheless went ahead to raise interest rates.

Australia's export price index rose 3.6%, while its import price index advanced 0.2% in the fourth quarter of 2024.

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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.

Outside of a U.S. President bending norms, the Fed also faces challenges in achieving its economic objectives. Inflation remains above its 2% target: Its preferred measure is at 2.4%, though core prices — considered a better gauge of where inflation is headed — rose 2.8% in November from a year ago.

Recent data show Japanese workers are gaining better wages and are generally set to receive solid pay raises in their upcoming annual union negotiations

Japan’s stance is at odds with the loosening trends adopted by the U.S. Federal Reserve and the European Central Bank, which have been cutting rates after raising them to clamp down on inflation.

Stocks surrendered early gains and closed lower after the White House said President Donald Trump would impose promised tariffs on some key U.S. trading partners.

A raft of U.S. economic data will provide plenty for investors to watch out for in the coming week, including ISM data on manufacturing and services as well as closely-watched nonfarm payrolls figures for January.

In Japan, the yen was last a touch stronger at 154.19 per dollar, having already climbed more than 1% for the week thus far. It was set to gain 1.9% for the month, which would mark its best January performance in seven years.

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