Bank of Japan raises key interest rate to 1.0%, highest in 31 years

The Bank of Japan (BOJ) has increased its key interest rate by 0.25 percentage points to 1.0%, a move not seen in six months. This decision, made during a two-day policy meeting, brings the benchmark rate to its highest point in roughly 31 years, dating back to 1995.

This marks a significant shift after the central bank had maintained the rate at 0.75% since December. The Nikkei newspaper interpreted the move as a measure to mitigate inflation risks, particularly those stemming from rising oil prices amid Middle East tensions. In a related decision, the BOJ will also cease its bond purchase reduction measures starting in April next year, aiming to maintain stability in the bond market.

Notably, the policy meeting proceeded without the participation of BOJ Governor Kazuo Ueda, who is currently hospitalized for treatment of a cystic infection. Senior Deputy Governor Shinichi Uchida is scheduled to explain the rationale behind the decision and outline the future direction of monetary policy at a press conference.