BOJ Raises Rates to 31-Year High Amid Inflation Concerns

The Bank of Japan (BOJ) raised interest rates to a 31-year high on Friday, signaling its focus has shifted from pushing prices up to target to preventing inflation from overshooting.

BOJ Governor Kazuo Ueda stated that underlying inflation is approaching 2%, and the bank's policy phase has changed. He emphasized the importance of stabilizing underlying inflation at 2% and warned that an overshoot could have a negative impact on Japan's economy.

The rate hike to 1.25% was achieved by a 7-2 vote, with dovish board members Toichiro Asada and Ayano Sato dissenting from the decision.

Ueda hinted at further rate hikes, stating that he would not rule out either back-to-back increases or increases of 50 basis points. He stressed the BOJ's aim is to act preemptively to avoid large moves that could unsettle financial markets.