BOJ Hikes Rates to Three-Decade High Amid Rising Inflation Concerns

The Bank of Japan (BOJ) raised interest rates by 25 basis points in its widely expected decision on Friday, marking the highest rate in over three decades. The policy rate has been lifted from 1% to 1.25%, as policymakers voted 7-2 in favor of the increase.

The BOJ's move is aimed at combating rising inflation, primarily driven by soaring energy prices. Japanese central bank Governor Kazuo Ueda stated that the bank's focus has shifted as underlying inflation approaches 2%, and there is a growing risk of it overshooting the target and negatively impacting Japan's economy.

The BOJ's primary task will now be to stabilize underlying inflation at 2%. However, the Japanese yen did not react positively to the decision and even fell against its major peers, as investors focused on the lack of explicitly hawkish guidance and the non-unanimous vote.