BoJ Hikes Rates to Record High Amid Inflation Fears

The Bank of Japan (BoJ) raised interest rates to a more than 30-year high, hiking them by 25 basis points to 1.25 percent on Friday.

This decision was expected by markets following recent tightening by the European Central Bank and the US Federal Reserve, but it was not unanimous as it was carried by a 7-2 majority vote.

The BoJ said it would continue to raise interest rates to counter inflation fueled by surging energy prices and a weak yen. The bank noted that underlying CPI inflation has been approaching two percent and financial conditions have been accommodative, leading them to believe further rate hikes are necessary.

Despite the hike to the highest since 1995, the yen weakened to more than 157 per dollar, compared with around 156.30 before the announcement. The cheap yen is driving up the cost of imported goods, which in turn is putting upward pressure on inflation.