Bank of Japan hikes key interest rate to 1.25 per cent
TLE Desk: The Bank of Japan raised its key interest rate to a more than 30-year high of 1.25 per cent on Friday, signalling further increases as it seeks to contain inflation driven by rising energy prices and a weak yen.
The 25-basis-point increase was widely expected by markets following recent monetary tightening by the European Central Bank and the US Federal Reserve.
The decision was approved by a 7-2 majority, the central bank said on its website.
Pressure on the BoJ to raise borrowing costs has intensified as the Middle East crisis has pushed up oil prices, threatening to sustain inflationary pressures.
The central bank is also seeking to support the yen, which fell to its weakest level against the dollar in 40 years in July. The decline prompted a joint foreign exchange intervention by the United States and Japan.
The BoJ said it would continue raising its policy rate as underlying consumer price inflation approaches its 2 per cent target and financial conditions remain accommodative.
The latest move takes Japan’s benchmark rate to its highest level in more than three decades as policymakers balance inflation risks against the need to support economic activity.
