Tokyo, Sep 18 (V7N)- The Bank of Japan (BOJ) has raised its benchmark interest rate from 1 percent to 1.25 percent in another move to contain inflation, marking its highest level since 1995, according to a BBC report.
The decision came amid continued inflationary pressure linked to higher global energy prices and the conflict in the Middle East. The US Federal Reserve and the European Central Bank have also raised interest rates in response to inflationary pressures.
The BOJ began moving away from negative interest rates in 2024, when its benchmark rate stood at minus 0.1 percent. Since then, the central bank has raised borrowing costs six times over the past two and a half years as Japan gradually seeks to move away from its long-standing ultra-low interest rate policy.
Generally, higher interest rates can make a country's currency more attractive to investors, potentially supporting its value. However, Japan continues to face economic challenges, including a weak yen, elevated commodity prices and a shrinking workforce.
Government data released ahead of Friday's decision showed that Japan's core inflation rate eased slightly to 1.7 percent in August from 1.8 percent in July. The figure remains close to the BOJ's 2 percent inflation target.
Although Japan's inflation rate remains relatively moderate by international standards, rising prices have become a major concern after decades of economic stagnation. For much of the past three decades, the country experienced very low inflation or periods of deflation.
Meanwhile, global oil and gas prices have risen this year amid disruptions to fuel transportation through the Strait of Hormuz due to the conflict involving Iran. Japan is particularly exposed to such disruptions because of its heavy dependence on energy supplies from the Middle East.
The yen has also remained under pressure. After the currency fell to a 40-year low in August, Japan and the United States reportedly intervened jointly in currency markets to support the yen. It was the first such joint intervention by the two countries since the 2011 earthquake and tsunami.
Japan's Ministry of Finance and the US Treasury had indicated that further action could be considered if necessary.
US Treasury Secretary Scott Bessent has also urged the BOJ to raise interest rates to help support the yen. He has called on BOJ Governor Kazuo Ueda to "make the right decision."
END/SMA/AJ
