BOJ Hikes Interest Rates to 1.25% Amid Inflation Fears

The Bank of Japan (BOJ) raised its policy interest rate by 25 basis points to 1.25%, marking the highest level since 1995. This decision aims to contain inflation and support the yen, which has been under pressure.

The rate increase was approved by a 7-2 majority, with BOJ board members Toichiro Asada and Ayano Sato opposing the hike. They argued that current economic and price developments did not warrant an immediate increase, suggesting that the underlying situation may not be strong enough to justify another rate rise.

The BOJ cited the risk of inflation moving above its 2% target as the reason for the rate hike. The central bank wants underlying inflation to stabilise at around 2%, and a sustained overshoot could have an adverse impact on Japan's economy.