BOJ Raises Rates to 1.25%, Highest Level in 31 Years

The Bank of Japan (BOJ) raised its policy rate from 1.0% to 1.25% on September 18, marking another step away from ultra-low-rate policies that dominated Japan for decades.

The decision was not unanimous, with two members of the BOJ Policy Board opposing the increase, both appointed under Prime Minister Sanae Takaichi's administration.

BOJ Governor Kazuo Ueda stated that underlying inflation is approaching 2% and emphasized stabilizing it around this level. He also said that the 'phase of policy has changed', which some interpreted as a signal for further tightening.

The higher interest rates will impact households, with variable mortgage rates increasing, leading to higher monthly repayments and pressure on household finances.