BOJ Hikes Rate to 31-Year High Amid Inflation Fears

The Bank of Japan (BoJ) has raised its benchmark interest rate to a 31-year high of 1.25% in an effort to counter rising inflation and pressure from Washington.

The decision, announced on Friday, marks the first hike since June and brings borrowing costs closer to levels deemed neutral to the economy by the BoJ.

Japan is struggling to contain inflation, which is being driven by factors including rising energy prices, global supply pressures, and domestic inflation exceeding the 2% target.

BoJ Executive Director Koji Nakamura noted that Japan faces a 'slow-moving demographic shock' with a shrinking labor pool lifting wages, a structural factor that cannot be dismissed as temporary.