BOJ Raises Benchmark Rate to 1.25%, Highest Since 1995

The Bank of Japan (BOJ) raised its benchmark interest rate by 25 basis points to 1.25% during its September meeting, marking the highest policy rate in the country since April 1995.

Seven out of nine board members voted in favor of the decision, with only Board Members Toichiro Asada and Ayano Sato dissenting. The hike was driven by persistent inflation fueled by rising oil prices and corporate price pass-throughs.

The BOJ noted that core CPI inflation has been rising moderately as higher business-to-business prices spill over into consumer prices and firms pass higher wages on to selling prices.

The central bank warned of upside risks that inflation could exceed its 2% target, citing ongoing geopolitical developments, including conflicts in the Middle East. It will closely monitor these developments and adjust monetary accommodation accordingly.