Japan Hikes Interest Rate to 1.25% as BOJ Seeks Normalization

The Bank of Japan raised its benchmark interest rate to 1.25%, a level not seen in 31 years, as it continues to normalize monetary policy after decades of near-zero rates.

The decision was widely expected and follows the US Federal Reserve's move this week to raise its key rate in an effort to quell stubbornly high inflation.

Bank of Japan Governor Kazuo Ueda said the rate increase was made after considering various risks, including the war in Iran and currency fluctuations. He noted that the Japanese economy is recovering gradually, with inflation close to the targeted 2%.

Analysts predict another rate hike may come later this year or early next year, but for now, the Bank of Japan will continue to monitor wage growth and other risk factors before making a decision.