BOJ Hikes Rates to 1.25%, Trails Behind Fed and ECB

The Bank of Japan (BOJ) has raised its policy rate to 1.25%, marking the highest level since 1995, as energy costs from the war in Iran put pressure on economies.

The decision comes after a unanimous vote by the Federal Reserve to lift its target range to 3.75%-4.00% and the European Central Bank's (ECB) move to raise all three key rates by 25 basis points, taking its deposit rate to 2.50%.

Japan still lags behind both peers, with the BOJ's sixth increase of the current cycle since tightening began in March 2024, when the policy rate was -0.1%.

The war in Iran has disrupted oil shipments and lifted prices this year, with Japan importing 94% of its crude oil from the Middle East in 2025.