Japan’s central bank raises interest rates to highest level since 1995

Japan" class="entity-link entity-organization" data-entity-id="17400" data-entity-type="organization">Bank of Japan hikes benchmark rate to 1 percent, continuing shift away from decades of ultra-low borrowing costs. Japan’s central bank has raised interest rates to a three-decade high, citing price pressures stemming from the Israel-war-on-Iran" class="entity-link entity-event" data-entity-id="44694" data-entity-type="event">United States-Israel war on Iran.The Japan" class="entity-link entity-organization" data-entity-id="17400" data-entity-type="organization">Bank of Japan (BOJ) on Tuesday voted 7-1 to hike its benchmark rate to 1 percent, a milestone in the country’s shift away from decades of rock-bottom borrowing costs.Recommended Stories list of 4 itemslist 1 of 4Iran, New Zealand share spoils in politically-charged World Cup matchlist 2 of 4US says Iran nuclear talks begin after framework deal signinglist 3 of 4UK seizes Russian ‘shadow fleet’ tanker – what that meanslist 4 of 4Football upstages politics as Iranians rally behind their team at World Cupend of listThe BOJ’s widely expected quarter-point hike lifted the key policy rate to its highest level since 1995, continuing its march away from an ultra-loose monetary policy aimed at reversing Japan’s economic stagnation.In a statement, the BOJ said that while Japan’s rate of inflation has been on target, rising oil prices have filtered down to transactions among businesses, which could lead to higher prices “across a wide range of items”.“Against this backdrop, taking into account that medium-to-long-term inflation expectations have also continued to rise, there is a risk of underlying CPI [consumer price index] inflation deviating upward to a level above the price stability target of 2 percent,” the central bank said.Japan imported about 95 percent of its crude oil from the Middle East before the start of the war, leaving the world’s fourth-largest economy vulnerable to spikes in fuel prices.Prime Minister Sanae Takaichi’s government has taken a series of measures to keep energy prices under control, including dipping into Japan’s strategic oil reserves and providing subsidies for households’ gas and electricity bills.Japan’s core CPI, which does not include fresh food prices, rose just 1.4 percent in April year-on-year, which the BOJ credited to the government’s measures to “reduce the household burden of higher energy prices”.