The Bank of Japan has raised its benchmark interest rate from 1.0% to 1.25%, marking a 31-year high. This move, the fastest pace of rate increases in 36 years, is intended to counter mounting inflation risks.
The decision follows a broader global trend of central banks hiking rates as high energy prices push up inflation. While Japan's inflation slowed for the first time in four months due to government subsidies, the rate hike was widely expected given the yen, underlying indicators, and pressure from the United States, including a campaign for tighter monetary policy by Treasury Secretary Scott Bessent.
The bank's decision was split 7-2, with board members Toichiro Asada and Ayano Sato dissenting from the hike.