Bank of Japan raises interest rates to 31-year high, flags concerns over inflation - CNBC
The Bank of Japan raised its policy interest rate to 1.25%, the highest level since 1995, to combat inflation risks. The decision was split 7-2, reflecting ongoing debates about the strength of the Japanese economy.
Why it matters
This shift in monetary policy affects global currency markets and the stability of the Japanese economy.
The Bank of Japan has raised its policy rate by 25 basis points to 1.25%, the highest level since 1995.
The move also marked a quickening in the BOJ's rate hike cycle since it started monetary policy normalization in March 2024, with the rise taking place three months from the BOJ's last hike, as compared to six months previously.
The decision was split 7-2, with board members Toichiro Asada and Ayano Sato dissenting from the hike. The duo are seen as reflationists and were appointed by Prime Minister Sanae Takaichi earlier this year.
The rise in rate hikes was widely expected, with almost 90% of economists surveyed by CNBC expecting the 25-basis-point tightening. Those surveyed also correctly predicted the dissenters to the decision.
In its statement, the BOJ said the move was because of a risk that inflation will deviate upward to beyond its 2% target.
Get smarter about the news
Sign up free for a feed built around what you actually care about, Dive Deeper research on any story, and the full text of every article.
Create free accountAlready have an account? Sign in