The Bank of Japan has raised its benchmark interest rate to 1.25%, its highest level in 31 years, as it steps up efforts to contain inflation.
The quarter-point increase from 1% was approved by a 7-2 vote and had been widely expected by financial markets.
A Familiar story of energy inflation
Governor Kazuo Ueda reportedly said the move reflected growing concerns that inflation could overshoot the Bank’s 2% target.
Higher energy costs, a weaker yen and rising prices linked to strong demand are adding to pressure on the Japanese economy.
The decision marks another step away from Japan’s decades of ultra-low and negative interest rates.
However, two policymakers opposed the increase, highlighting concerns about economic conditions and the pace of further tightening.
The yen weakened following the announcement, as investors assessed how quickly the Bank might raise rates again.