📈 BOJ Raises Interest Rates to 31-Year High Amid Inflation Risks

The Bank of Japan (BOJ) raised its short-term policy rate to 1% from 0.75% in a 7-1 vote on Tuesday, marking borrowing costs unseen since 1995. The move reflects policy normalization to tame broadening price pressures stemming from the Middle East energy shock. • Policy & Rate Metrics: Short-term policy rate increased by 25 basis points to 1.00%. The BOJ also paused its bond taper program from April 2027, maintaining Japanese Government Bond (JGB) purchases at ~2 trillion yen (US$ 12.5 Bn) per month. • Economic Drivers & Inflation: While a recent US-Iran peace deal diminished sharp economic deterioration risks, wholesale inflation hit a 3-year high of 6.3% in May. Companies are rapidly passing on previous oil shocks to consumers, threatening to push core inflation above the BOJ's 2% target. • Market & Currency Reaction: The Nikkei 225 jumped 1% to a fresh record high above 70,000. The yen briefly rose before sliding to 160.29 per US$, keeping the central bank under pressure to prevent import-driven inflation. Analysts expect a gradual hiking path of once every six months to a year.