BOJ Hikes Benchmark Rate to 1.25%, Highest Since 1995

The Bank of Japan's Monetary Policy Council has raised its benchmark interest rate by 25 basis points to 1.25%, marking its highest level in 31 years since 1995.

This move, widely anticipated by investors, was approved with a clear majority of 7 votes to 2 and is supported by the moderate rise in the year-on-year rate of the core Consumer Price Index (CPI), which excludes fresh food.

The Bank of Japan attributes the increase in benchmark inflation to the transfer of higher costs among companies and the incorporation of wage increases into final prices.

However, the institution warns that various sources of uncertainty for the central scenario of the Japanese economy remain, including the evolution of the situation in the Middle East, volatility in foreign exchange markets, and the dynamism associated with Artificial Intelligence (AI).