BOJ Hikes Rates to 1-Year High Amid Inflation Concerns

Japan's central bank has raised its benchmark interest rate to 1.25%, marking a 31-year-high, in an effort to normalize monetary policy and counter deflation.

The Bank of Japan has been keeping interest rates near or below zero for decades to encourage borrowing and spending, but now sees a need to raise them to support the economy's recovery.

Analysts expect another rate increase later this year or early next year, as Governor Kazuo Ueda noted that more time is needed to see if price increases stay stable and wage growth accelerates.

The decision comes amidst concerns about the weakening yen and pressure from the US Federal Reserve to raise rates. Despite the Bank of Japan's move, the US dollar grew stronger momentarily reaching above 157 yen.