What does the Bank of Japan increasing its interest rate from .25% to .5% mean and why is it causing panic in the markets?

Question

I’m no good at economics lol

In: 4812

Answer 1

It just means that inflation is too rapid for even a country like Japan, one that is desperate for inflation. Think of it like this, farmers want rain during a drought to help feed their crops, but they don’t want a tsunami. Right now, Japan is saying they are seeing a “tsunami” of inflation that might cause their citizens to go bankrupt just to buy the typical goods and services.

I also want to add that the “rapid inflation”narrative that Japan is indicating runs counter to the U.S Feds guidance that inflation is slowing. Thus, the markets are reacting to this conflicting information.