Bank of Japan raises rates to 31-year high of 1.25% as inflation rises
Bank of Japan raises benchmark interest rate from 1 to 1.25 percent, pledging to help counter inflation risks.
The Bank of Japan (BoJ) has raised interest rates by 0.25 to 1.25 percent, pushing borrowing costs to their highest level in 31 years, amid rising inflation and wages, and pressure from Washington.
The move on Friday marked the first hike since June, and takes interest rates closer to levels the BoJ deems neutral to the economy, marking another step away from decades of ultra-low rates that cemented the yen’s status as a cheap global funding currency.
Japan is grappling to contain inflation, which is being driven by factors including rising energy prices, global supply pressures and domestic inflation exceeding the 2 percent target.
The country also faced a “slow-moving demographic shock” with a shrinking labour pool lifting wages, a structural factor that cannot be dismissed as temporary, BoJ Executive Director Koji Nakamura said on Monday.