The Bank of Japan (BOJ) unexpectedly raised its overnight call rate target on Wednesday to 0.25% from the previous 0 to 0.1% range, marking the highest level since 2008. While it is still low by global standards, this relative spike reflects the BOJ’s broader strategy to move toward a more normalized monetary policy.

This shift poses three primary risks for South Korea: heightened exchange rate volatility, potential capital outflows and threats to economic stability.