BOJ Hikes Interest Rate to 31-Year High Amid Rising Energy Costs

Japan's central bank has taken another step towards tightening its monetary policy by raising interest rates to a 31-year high of 1.25%. This move comes as a response to rising energy costs and a weak yen, which are putting pressure on the economy.

The Bank of Japan (BOJ) had been gradually shifting away from its negative-interest-rate policies and extremely low interest rates over the past few years. The rate hike cycle began in 2024 with an interest rate of -0.1%, and this recent increase takes it to a level not seen since 1995.

The decision to raise interest rates is also linked to the global trend of monetary tightening due to high energy prices. Japan, which relies heavily on energy imports from the Middle East, has been vulnerable to these price increases, leading to higher household expenditures and business costs.