Bank of Japan plans to raise rate to 1.25% — The Japan Times
The Bank of Japan plans to raise its key interest rate from about 1% to 1.25% at its monetary policy meeting starting next week. As The Japan Times reports, informed sources disclosed these intentions on Friday.
Highest level in 31 years
If the decision is made, the Bank of Japan's rate will reach its highest level in about 31 years. It was last at 1.25% in April 1995. Previously, the Japanese central bank raised the rate in June, to about 1%.
The regulator considers the Japanese economy resilient and financial conditions accommodative: lending continued to grow even after the June rate increase. At the same time, the Bank of Japan sees risks of accelerating price growth associated with higher oil prices, a weaker yen, and increased demand related to artificial intelligence.
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Inflation risks
Core inflation is approaching the Bank of Japan's 2% target. In the regulator's view, maintaining the current rate level could create a risk that inflation exceeds this target. Previous rate increases took place about once every six months, while a possible new decision could be made three months after the June one.
On September 2, Bank of Japan Governor Kazuo Ueda said after a meeting of G20 finance ministers and central bank governors in Asheville, United States, that the possibility of raising the rate would be discussed at every meeting, including the next one. US Treasury Secretary Scott Bessent has repeatedly expressed expectations of a swift rate increase in Japan to prevent excessive weakening of the yen.
