BoJ Hikes Interest Rates to 1.25%, Sending Yen Plummeting

The Bank of Japan (BoJ) raised interest rates by 25 basis points to 1.25%, marking the highest level in 31 years, and sparking a sharp decline in the Japanese Yen against the US Dollar.

As anticipated by market experts, the BoJ's decision to tighten monetary conditions was influenced by recent wage data that suggests a path towards quicker policy normalization.

Analysts at Deutsche Bank had previously stated that the latest upside surprise in Japan's wage data 'reinforces the overwhelming case for the BoJ to raise interest rates at its policy meeting on September 18', following its previous hike three months ago.

The BoJ also warned of a risk that inflation might exceed its 2% target, and recent Yen depreciation may push prices higher.