Japan raises interest rate to new 31-year high to curb rising prices — SkimNews
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- Bank of Japan raised its main interest rate to 1.25% from 1% on Friday, the highest level since 1995 and its sixth hike in two and a half years.
- The BOJ has moved its policy rate from minus 0.1% in 2024 to 1.25%, steadily exiting decades of ultra-low or negative interest rates to converge with major economies.
- Scott Bessent publicly pressed BOJ Governor Kazuo Ueda to "do the right thing" and raise rates to support the yen, signaling US impatience.
- Tokyo and Washington confirmed in August they jointly intervened to halt the yen's slide after it hit a 40-year low — the first such coordination since 2011.
- Japan's core inflation eased to 1.7% in August from 1.8% in July, remaining close to the BOJ's 2% target.
- Iran war disruptions through the Strait of Hormuz have lifted global oil and gas prices, with Japan especially exposed given its heavy reliance on Middle East energy.
- The Fed raised its benchmark rate Wednesday and the ECB hiked earlier this month, as major central banks coordinate a response to energy-driven inflation.
Why it matters: Japanese borrowers now face their highest benchmark rate since 1995, and Bessent's public pressure on Governor Ueda reveals the US is treating yen support as a precondition — tying the BOJ's path to the same energy-inflation response driving the Fed and ECB, with Tokyo and Washington already coordinating currency intervention for the first time since 2011.
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