BOJ Raises Rates to 31-Year High Amid Persistent Inflation

The Bank of Japan (BOJ) has raised interest rates to a 31-year high, marking its readiness to continue pushing up borrowing costs. The widely expected move takes interest rates closer to levels that would be neutral to the economy.

The BOJ's policy rate was increased to 1.25 per cent from 1 per cent by a 7-2 vote, with dovish board members Toichiro Asada and Ayano Sato dissenting. The decision follows similar hikes by its European and US peers, highlighting central banks' focus on global inflation risks.

The BOJ cited persistent inflation pressures driven by soaring oil costs, expansionary fiscal policies, and surging demand for AI investment as reasons for the rate hike. It noted that wholesale inflation remains elevated, with price pressures from business-to-business trading spilling over into consumer prices.