The Bank of Japan, Japan's Central Bank, raised its benchmark interest rate on the 16th at a monetary policy meeting, its first hike in six months.
According to Kyodo News and others, the Bank of Japan decided at the two-day monetary policy meeting that began the previous day to raise the benchmark short-term policy rate by 0.25 percentage points, from the current "around 0.75%" to "around 1%."
With this increase, Japan's benchmark rate has reached its highest level in 31 years, since September 1995.
Since ending its negative interest rate policy in Mar. 2024 for the first time in 17 years, the Bank of Japan has maintained a gradual tightening path. In July of the same year, it raised the benchmark rate from 0–0.1% to "around 0.25%," then to "around 0.5%" in January last year, and to "around 0.75%" in December, respectively.
In the market, expectations were strong that the Bank of Japan would deliver another rate hike at this meeting. That is because the view spread that inflationary pressure posed a greater risk than concerns over an economic slowdown stemming from instability in the Middle East.
In its decision released the same day, the Bank of Japan said regarding future currency policy, "We will continue raising the policy rate depending on economic, price and financial conditions, and will adjust the degree of monetary easing." The statement left the door open to additional rate hikes.
Earlier, Bank of Japan Governor Kazuo Ueda suggested the possibility of a rate hike this month, saying in a lecture on the 3rd that "even amid uncertainty in the Middle East situation, it is necessary to fully discuss the appropriateness of raising rates." However, Governor Ueda has been hospitalized with a liver disease since the 9th and was unable to attend this meeting.