BOJ Hikes Interest Rate to 1.25% Amid Inflation Concerns

The Bank of Japan (BOJ) has raised its policy interest rate to 1.25% from 1% in a 7-2 vote, marking its sixth rate hike since March 2024 under Governor Kazuo Ueda's leadership.

The decision follows no change in July and a 25-basis point rise in June, with market participants expecting another rate hike in December or January.

The BOJ warned that elevated energy prices caused by the Iran war could spread to a wide range of goods and services, pushing up underlying inflation above its 2% price stability target.

Board members Toichiro Asada and Ayano Sato dissented, arguing that rate hikes at this point would not be appropriate as economic growth and inflation have not substantially accelerated.