BOJ Raises Interest Rate to 31-Year High Amid Inflation Pressures

The Bank of Japan has made a significant move by raising its policy interest rate to 1.25% on September 18, marking its highest level since 1995. This decision was widely anticipated and marks another step away from Japan's decades-long low-interest-rate era.

The increase in the interest rate is expected to take effect on September 24, as stated by the BOJ's policy statement. The central bank has also forecasted that annual inflation, measured by the consumer price index (CPI) excluding fresh food, will accelerate above 2% from the second half of fiscal 2026.

The yen weakened after the announcement, with investors focusing on the BOJ board's 7-2 vote. This division within the board has raised questions about how readily the central bank can secure support for further increases in interest rates.