BOJ Raises Interest Rate to 31-Year High Amid Inflation Concerns

The Bank of Japan (BOJ) has raised its key policy rate to a 31-year high of 1 percent, warning of elevated inflation risks stemming from higher crude oil prices due to the Middle East conflict and a weak yen, Junko Horiuchi reported for Mainichi Japan.

The headquarters of the Bank of Japan in Tokyo following a decision to raise interest rates to a 31-year high.

The central bank, in the absence of Governor Kazuo Ueda, who has reportedly been hospitalized for medical treatment, raised the short-term interest rate from 0.75 percent in its first hike since December.

It said the recent US-Iran agreement to end the war is a positive development but that uncertainties surrounding the economy remain.

The rate hike, following three consecutive meetings in which policy was kept steady, places the BOJ back on a normalization path after more than a decade of unconventional monetary easing that ended in March 2024, Kyodo News also reported.

In its statement, the BOJ said there is a risk that underlying inflation could rise above its 2 percent target as higher crude oil prices push companies to raise prices in business-to-business transactions “at a relatively fast pace,” potentially spilling over into consumer prices across a broad range of goods.

BOJ Deputy Governor Shinichi Uchida said during a post-meeting press conference that the central bank would continue raising rates to stabilize inflation around the 2 percent target, noting that financial conditions remain accommodative even after the latest increase.