BOJ Hikes Interest Rate to 1.25%, Impacting Global Capital Flows and Emerging Markets

The Bank of Japan (BOJ) has raised its benchmark interest rate by 25 basis points to 1.25%, marking the highest level in 31 years, as per media reports.

The decision was taken by a 7-2 vote and comes as Japan grapples with inflation pressures linked to higher energy and import costs.

The yen remains under pressure, which could impact global capital flows and emerging markets. Investors who borrowed cheaply in yen to invest in higher-yielding assets may reassess their positions due to increasing borrowing costs.

The BOJ's decision comes shortly after the US Federal Reserve raised its policy rate, keeping global monetary policy firmly in focus.