BOJ Hikes Policy Rate to 1.25%, Projects Above-Target Inflation
The Bank of Japan (BOJ) has raised its policy rate by 25 basis points to around 1.25%, its highest level since 1993, in a move that was widely expected.
In a 7-2 vote, the BOJ's Policy Board decided to increase the policy rate and adjust the degree of accommodation, with two board members dissenting from the decision.
The accompanying economic assessment projects that CPI excluding fresh food will accelerate to clearly above 2% from the second half of fiscal 2026, driven by past crude oil price rises, higher semiconductor and AI-related prices, and yen depreciation feeding into durable goods prices.
The BOJ also noted that the Middle East situation and AI-related demand pose two-sided risks to its inflation outlook, which could delay or accelerate the pace of further tightening beyond today's move.