The Bank of Japan raised its policy rate to 1.25%, its highest level in 31 years, and signaled further rate hikes ahead. The decision was approved by a 7-2 vote at a 2-day meeting, bringing the BOJ's outlook closer to the neutral range of 1.1%-2.5%.
The Bank of Japan raised its policy rate from 1% to 1.25% at Friday's meeting, taking it to a 31-year high. The decision was reportedly approved by 7 votes to 2, with some members regarded as dovish voting against it.
The rate hike was positioned as a response to global inflation risks, with rising oil prices, energy shocks, expanded fiscal policy and demand for AI investment cited as contributing factors. The BOJ described the move as coordinated with rate hikes by central banks in the United States and Europe.
Following the announcement, the yen briefly moved lower, weakening to ¥156.91 per US dollar. BOJ Governor Ueda Kazuo (上田和夫) said the risk of underlying inflation approaching the 2% target had increased and emphasized a change in the policy phase.
The BOJ has pursued a 2% inflation target for several years, but the latest rate hike is expected to bring the policy rate closer to the nominal neutral rate range of 1.1%-2.5%, drawing attention to the course of policy going forward.