The Bank of Japan decided to raise interest rates for the first time in three months since June. It raised the target for the policy rate to around 1.25%, taking it to a level not seen in 31 years, since 1995.
Based on the outlook ahead of its publication, the Bank of Japan decided to raise its policy rate for the first time in three months. It raised the target from around 1.0% to around 1.25%. The decision was approved by 7 of the 9 policy board members.
The rate hike was described as a measure taken in response to concerns about inflation risks, against a backdrop that included the risk of higher crude oil prices and resilient AI demand. With the yen exchange rate remaining close to its lowest level ever amid continued rate hikes in the United States, the Bank is seen as having accelerated the pace of monetary policy tightening.
Attention is expected to shift to the pace and direction of the next rate hike. Market participants will be watching how Governor Ueda outlines the Bank’s future policy at his press conference on the afternoon of the 18th, as they seek to assess the next developments in monetary policy.
The decision is positioned as part of the Bank of Japan’s efforts to balance long-term price stability with the maintenance of growth.