Japan's Central Bank Hikes Rates to 1.25% Amid Global Economic Pressures

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

The Bank of Japan has been trying to normalize monetary policy after decades of keeping rates near or below zero to combat deflation and boost borrowing and spending.

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

The Japanese economy is recovering gradually, with inflation close to the targeted 2%, Ueda noted.