The Bank of Japan has raised its policy interest rate to 1.25 percent, the highest level recorded in 31 years.
The widely expected decision was approved by a 7–2 vote at the end of the central bank’s two-day policy meeting.
Board members Toichiro Asada and Ayano Sato dissented from the majority decision, reflecting continuing debate over the appropriate pace of tightening.
The increase is designed to contain inflationary pressure and prevent price growth from remaining above the bank’s two-percent target.
It also marks another step away from the ultra-low interest rates that shaped Japanese monetary policy for decades.
Higher borrowing costs may support the yen but could also place pressure on households, companies and the government’s substantial debt-servicing burden.
Investors will closely examine Governor Kazuo Ueda’s guidance for signals about whether further increases are likely and how the bank assesses wages and domestic demand.
Source: Reuters
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