Bank of Japan Aims for 1.25% Interest Rate Amid Inflation Risks

The Bank of Japan is considering raising its key interest rate to 1.25% at its upcoming monetary policy meeting, according to informed sources.

This would be the highest level in about 31 years, last reached in April 1995 when the rate was also 1.25%. The central bank has been gradually increasing rates since June, with the most recent increase bringing it to around 1%.

The Bank of Japan views the Japanese economy as resilient and financial conditions as accommodative, allowing lending to continue growing despite the rate increases.

However, the regulator also sees risks associated with higher oil prices, a weaker yen, and increased demand related to artificial intelligence, which could accelerate price growth.