BOJ Raises Benchmark Interest Rate to 1%, Highest Level in 31 Years

The Bank of Japan (BOJ), Japan's central bank, has raised its benchmark interest rate to 1%.

AFP Yonhap News

On June 16, the BOJ announced at its Monetary Policy Meeting that it had decided to increase the short-term policy interest rate from the previous 0.75% by 0.25 percentage points, setting it at 1%.

This marks the first time in 31 years, since September 1995, that Japan's benchmark interest rate has entered the 1% range. The BOJ ended its negative interest rate policy in March 2024, after 17 years. It then raised the rate by 0.25% in July 2024, 0.5% in January 2025, and 0.75% in December 2025. This latest increase comes after approximately six months.

This rate hike is seen as a measure to curb the risk of accelerating inflation, as rising crude oil prices due to heightened tensions in the Middle East ripple through the economy. In addition, the BOJ has decided to halt its plan to reduce government bond purchases starting April 2027, and will maintain its monthly government bond purchases at around 2 trillion yen, in consideration of stability in the bond market.

In the statement released on the same day, the BOJ said regarding its future monetary policy, "We will continue to raise policy interest rates and adjust the degree of monetary easing, depending on economic, price, and financial conditions." This is interpreted as an indication that the BOJ will maintain its stance of additional rate hikes going forward.

This content was produced with the assistance of AI translation services.