Japan lifts rate to 31-year high

The Bank of Japan has increased its main interest rate to its highest level since 1995 as the country battles inflation and a weak yen.

Board members at the central bank voted on June 16 to raise its policy rate to 1 per cent from 0.75 per cent, the first increase since December 2025.

Rising crude oil costs are pushing up wholesale prices, and price increases may spread to a range of consumer goods, the bank says in a statement.

It adds underlying inflation, which was 1.4 per cent in April, risks surpassing the two per cent price stability target, reports the Japan Times.

Shinichi Uchida, the bank’s deputy governor, says it will likely continue raising its policy rate depending on the economic conditions and prices.

“Regarding the future path of interest rates and the pace of adjusting monetary accommodation, we believe it is necessary for the time being to closely monitor how developments in the Middle East will affect financial and foreign exchange markets, as well as Japan’s economic activity and prices,” he said. 

Japan’s interest rates were cut in the 1990s and had been near zero for two decades as prices fell and growth stagnated, reports the BBC.

The bank has been under pressure to cool inflation and has slowly been increasing its interest rate since March 2024.