Bank of Japan Raises Interest Rates to 1.25 Percent
In response to rising inflation and global economic pressures, the Bank of Japan has raised interest rates to their highest level since 1995.
The Bank of Japan raised its interest rate from 1 percent to 1.25 percent in response to rising inflation and economic pressures, bringing it to its highest level in 31 years.
Interest Rate Hike and Historical Level
Interest rates in Japan have been raised to their highest level in 31 years to combat rising inflation. In a move largely anticipated by the markets on Friday, the Bank of Japan increased its interest rate from 1 percent to 1.25 percent.
Policies of Global Central Banks
This level was last seen in 1995. This development comes at a time when the world's leading central banks have been raising interest rates as surging energy prices driven by the war in Iran have fueled inflation. The U.S. Federal Reserve raised its policy rate on September 16, while the European Central Bank also increased borrowing costs.
Inflation and Energy Costs
According to official data, core inflation fell to 1.7 percent in August from 1.8 percent the previous month, but remained close to the bank's 2 percent target level. Disruptions to shipments in the Strait of Hormuz due to the war in Iran are driving up global oil and natural gas prices.
Yen and Monetary Policy Expectations
In August, Tokyo and Washington intervened jointly to halt the yen's decline after it hit a 40-year low. Analysts note that if the yen remains weak despite higher interest rates, the resulting inflationary pressure could force a faster tightening of monetary policy.