The BOJ raised its policy rate by 0.25 percentage points to 1.25%. The additional rate hike was attributed to mounting inflationary pressure, higher oil prices and the weaker yen, as well as monetary tightening in the United States.
The BOJ raised its policy rate by 0.25% to 1.25%. This accelerated the pace of additional rate hikes, which had generally occurred once every six months since negative interest rates were lifted in March 2024.
The move was attributed to the effects of higher oil prices resulting from turmoil in the Middle East and the weaker yen. Governor Ueda (植田) explained that the policy environment had entered a new phase, citing the risk that inflation could exceed 2%.
The US Federal Reserve’s rate hike, its first in 3 years and 2 months, was also seen as a contributing factor. Views held that the interest rate differential between Japan and the United States would not narrow and that downward pressure on the yen would continue.
A discrepancy appeared between the government’s and the BOJ’s views on prices, while questions were raised about the appropriate timing of the rate hike and side effects such as higher mortgage rates.