BOJ Raises Rates to 31-Year High as Inflation Risks Mount

The Bank of Japan (BOJ) has raised its interest rates to a 31-year high, signaling a shift towards preventing inflation from exceeding its target. The central bank's policy rate is now at 1.25 percent, up from one percent in a move that was expected by markets but still carries significant implications for the Japanese economy.

The decision was made in a 7-2 vote, with new board members Toichiro Asada and Ayano Sato dissenting from the hawkish stance. BOJ Governor Kazuo Ueda warned that underlying inflation approaching two percent had shifted the central bank's focus towards guarding against an overshoot.

'If risks of underlying inflation overshooting two percent materialize, that could have a negative impact on Japan's economy,' Ueda said at a news conference. He also left open the possibility of further rate hikes or 50-basis-point increases to avoid being forced into large moves that could unsettle financial markets.