Bank of Japan raises interest rate to 1.0%, the highest level since 1995

The Bank of Japan raised its policy interest rate to 1.0%, the highest level since 1995, following a unanimous 7-1 board vote to hike rates by 25 basis points as it moves to normalize monetary policy amid rising inflation pressures and a weak yen. This significant decision, paired with plans to further reduce Japanese government bond purchases, is directly affecting investors and the broader JGB market, which saw yields increase slightly while the yen appreciated against the dollar. The central bank cited persistent upsides to inflation, higher energy costs, and concerns that prices could stay above its 2% target as key drivers, signaling that additional rate hikes remain possible if inflation continues to rise. As the world's fourth-largest economy adjusts its borrowing costs to their 31-year high, the move underscores a strategic shift toward controlling inflation risks fueled by surging energy prices and a depreciating currency, with global markets closely watching for further follow-up actions.