The Bank of Japan raised its policy rate by 25 basis points to 1.25%, the highest level since 1995. The decision, passed 7-2, marks a quickening of the monetary tightening cycle that began in March 2024. The hike aims to address risks of inflation surpassing the institution’s 2% target, amid historically weak yen and a Japanese trade deficit exceeding 1 trillion yen in August. After the announcement, the Japanese currency weakened to 156.64 yen per dollar, while the 10-year Japanese government bond yield fell to 2.947%.
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