Japan raises interest rate to new 31-year high to curb rising prices

Live updates

1. 2h ago

   Bank of Japan Raises Interest Rates to 31-Year High

   The Bank of Japan increased its benchmark interest rate to 1.25%, the highest level in 31 years, to combat rising prices and inflation. The move was expected by markets, but the decision followed a split vote among policymakers. Despite the hike, the Japanese yen weakened against the US dollar, and stocks rose as the split vote tempered expectations for more aggressive future tightening. The central bank has signaled that further rate increases may be necessary to keep pace with global peers.

   Why it matters

   Japan has long maintained low rates, but global inflation risks from energy costs and AI investment demand have pressured the bank to tighten policy. The decision occurs amid pressure from the US and a difficult balancing act with US Treasury chief Bessent. Higher domestic rates may make US investments less attractive to Tokyo-based investors.

   What is confirmed

   • The Bank of Japan raised its benchmark interest rate to 1.25%.
   • This interest rate is the highest Japan has seen in 31 years.
   • The rate hike was intended to curb rising prices and address inflation concerns.
   • The Japanese yen dropped against the US dollar following the rate announcement.

   Still unconfirmed

   • The rate hike occurred under pressure from the United States.
   • The Bank of Japan is struggling to keep pace with its hiking partners.

   What to watch next

   • Further rate hike signals from the Bank of Japan
   • Market reactions to the balancing act with US Treasury chief Bessent
   • Potential currency interventions to stabilize the yen
   Sources used for this update (15)

   1. CNBC — Bank of Japan raises interest rates to 31-year high, flags concerns over inflation
   2. BBC — Japan raises interest rate to new 31-year high to curb rising prices
   3. Bloomberg.com — JPY/USD: Japanese Yen Drops Against US Dollar After BOJ Raises Rates as Expected
   4. WSJ — Japan’s Central Bank Picks Up Pace of Tightening With Rate Hike
   5. WSJ — Bank of Japan Raises Rates, Making U.S. Less Alluring for Tokyo Investors
   6. Reuters — Stocks rise, yen weakens as BOJ split-vote hike tempers hawkish wagers
   7. The New York Times — Japan Raises Interest Rates to 31-Year High Under U.S. Pressure
   8. AP News — Japan’s central bank raises benchmark interest rate to 1.25%, the highest in 31 years
   9. Reuters — Morning Bid: BOJ struggling to keep pace with hiking partners
   10. Bloomberg.com — The BOJ’s Balancing Act With Bessent Is Only Going to Get Harder
   11. japantimes.co.jp — BOJ’s balancing act with U.S. Treasury chief Bessent is only going to get harder
   12. FOREX.com — USD/JPY weekly forecast: Suspected rate check revives intervention threat
   confidence 95%