The Bank of Japan raises rate to 31-year high

At the end of its two-day monetary policy meeting, the BOJ voted 7-2 to increase the rate from 1%. Policy Board members Toichiro Asada and Ayano Sato opposed the decision.

“Wholesale inflation remains elevated and price pressures from business-to-business trading have started to spill over into consumer prices,” the BOJ said in its statement.

The central bank added that “underlying inflation has been approaching 2%,” as businesses continue passing higher wage and operating costs on to consumers, while inflation expectations rise.

The latest increase marks the BOJ’s first rate hike in three months and continues its gradual withdrawal from decades of ultra-low borrowing costs. The bank ended its prolonged monetary stimulus program in 2024 and has since raised rates several times.

Higher energy and import costs, partly driven by the weak yen and rising global oil prices amid the US-Iran conflict, have added to inflationary pressure. The US dollar was trading at around 155 yen.

The new rate is within the BOJ’s estimated 1.1% to 2.5% range for Japan’s nominal neutral interest rate, which neither stimulates nor restrains economic growth.

The BOJ has indicated that further policy adjustments will depend on inflation, economic activity and financial conditions.

Earlier, Qazinform News Agency reported that the U.S. Federal Reserve had raised its benchmark interest rate by 25 basis points, marking its first rate increase in more than three years as the central bank sought to curb persistent inflation.