Japan Raises Benchmark Interest Rate to 31-Year High

Japan's central bank, the Bank of Japan, has raised its benchmark interest rate to 1.25%, marking the highest level in 31 years.

The increase from 1.0% was widely expected and is part of the Bank of Japan's efforts to normalize monetary policy after decades of keeping interest rates near or below zero to boost borrowing and spending.

Bank of Japan Governor Kazuo Ueda said the decision was made after considering various risks, including the war in Ukraine, expanding demand for artificial intelligence, and currency fluctuations.

The Japanese economy is recovering gradually, with inflation close to the targeted 2%, according to Ueda. However, some analysts warn that higher rates may weigh on the economy due to increased borrowing costs for small and medium-sized enterprises and higher mortgages.