Bank Of Japan Hikes Interest Rate To 1.25% As Weak Yen Fuels Inflation Fears

The Bank of Japan has raised its policy interest rate by 25 basis points to 1.25%, taking borrowing costs to their highest level in 31 years. The 7-2 decision marks the central bank's second rate increase in just three months and signals a faster pace of monetary tightening as Japan confronts inflation risks and a historically weak yen. The BOJ said underlying inflation is approaching its 2% target but warned of a risk that price pressures could overshoot. Higher energy costs and the weak yen have increased pressure on Japanese businesses and consumers through more expensive imports.