As the nation moves away from decades of extremely cheap borrowing costs and economic pressures mount, Japan’s central bank has raised its primary interest rate to a new 31-year high. The Bank of Japan (BOJ) raised the rate on Friday from 1% to 1.25%, a level not seen since 1995, as widely expected. It coincides with major global central banks raising interest rates due to rising oil costs brought on by the Iran War, which are contributing to inflation.
The European Central Bank boosted borrowing prices earlier this month, while the US Federal Reserve lifted its benchmark interest rate on Wednesday for the first time in more than three years. Since 2024, when the rate was minus 0.1%, the BOJ has been increasing it. Over the past two and a half years, it has raised rates six times.
To bring rates in line with other major economies, the ECB has been raising them steadily. The country’s currency often strengthens when a central bank tightens monetary policy, which makes it more appealing to traders. According to market researcher Lale Akoner of investing firm eToro, “one of the world’s last sources of ultra-cheap money is disappearing.
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