#BOJHikesRatesTo1Pct31YearHigh

The Bank of Japan (BOJ) has raised its benchmark interest rate from 0.75% to 1.00%, marking the highest policy rate in Japan since 1995 and the first rate hike since December 2025. The decision was approved by a 7-1 vote as policymakers responded to persistent inflation pressures and rising energy costs.

Why it matters:

Japan is continuing its shift away from decades of ultra-loose monetary policy.

Higher rates can strengthen the yen, increase borrowing costs, and influence global capital flows.

The move signals that the BOJ remains focused on containing inflation despite concerns about economic growth.

Market reaction:

The Japanese yen strengthened modestly after the announcement.

The Nikkei 225 reached record highs as investors interpreted the move as a sign of confidence in Japan's economic outlook.

Key takeaway:

A 1% policy rate may seem low compared with many Western economies, but for Japan it represents a historic milestone and a major step in the normalization of monetary policy after decades of near-zero interest rates.