BOJ Hikes Rate to Highest Since 1995 Amid Energy-Driven Inflation

The Bank of Japan (BOJ) has raised its short-term policy rate by a quarter of a percentage point to 1.25%, marking the highest level since 1995. The decision was made in response to persistent inflationary pressures stemming from surging energy costs and a sharply weakened yen.

The BOJ cited higher oil, gas, and electricity prices as the primary drivers of inflation, with Japan's consumer price index edging above the bank's 2% target. By raising rates, the BOJ aims to curb demand-side pressures and reinforce the currency, while also signaling that it will not tolerate a prolonged overshoot of its inflation goal.

The policy shift reflects the delicate interplay between the BOJ's statutory independence and the political environment in Tokyo. The BOJ has been granted autonomy to pursue long-term price stability, even when short-term political pressures have called for more stimulus or aggressive easing.