Bank of Japan Raises Rate to 1%, Weak Yen and Oil Prices Drive Move
By Aboki Forex —
The Bank of Japan has increased its benchmark interest rate to 1%, the highest level in three decades. The central bank raised the uncollateralized overnight rate by a quarter point from 0.75%.
This move is part of a wider effort to normalise monetary policy after years of keeping rates near or below zero. Japan had long used ultralow rates to encourage borrowing and fight deflation.
Inflationary pressure from the war in Iran has hit Japan hard. The country imports almost all its oil and gas, and soaring crude prices are squeezing businesses and households. The weak yen, which has fallen to around 160 yen to the U.S. dollar, has added to the strain.
The central bank said the economy has recovered but warned that rising oil prices, driven by the situation in the Middle East, will hurt corporate profits and household incomes. It expects moderate growth, supported by government measures and private activity.
The bank also said it is watching developments in the Middle East, foreign exchange markets, and global AI-related demand. Governor Kazuo Ueda did not attend the policy meeting due to a recent hospital stay. Deputy Governor Shinichi took part in his place.