Bank of Japan raises interest rate to 31-year high

The Bank of Japan has increased its short-term interest rate target from 1% to 1.25%, marking the highest level since 1995. The decision, supported by seven of nine board members, will take effect on September 24. The central bank cited rising inflationary pressures, including increased labor costs and global demand for AI-related hardware, as primary drivers for the policy tightening. While two board members opposed the hike, citing insufficient evidence of sustained economic growth and inflation, the bank signaled its intent to continue tightening monetary policy. Following the announcement, the Japanese yen fell by 0.8% to 157.15 against the dollar as the market had already priced in the move.