The Bank of Japan (BOJ) has raised its benchmark interest rate to 1.25%, the highest level in three decades, in a move aimed at curbing inflation risks driven by rising import costs and energy prices. The central bank’s decision follows public pressure from U.S. Treasury Secretary Scott Bessent, who urged Japan to accelerate monetary tightening to support the yen.
The rate hike, which brings the BOJ’s policy rate to its highest since 1992, comes amid growing concerns over inflation exceeding the bank’s 2% target. The decision coincided with a 0.5% rise in the bitcoin-Japanese yen pair (BTC/JPY), which traded at JPY 12.06 million, and a decline in the yen against the dollar, with USD/JPY reaching 156.70.
The BOJ’s action contrasts with the Federal Reserve’s recent tightening, which raised its benchmark rate to 3.75%-4.00% in its first hike since 2023. Goldman Sachs and Morgan Stanley have forecast further Fed rate increases in October, reflecting broader global inflationary pressures.
Reportedly, a mini-crash in equities and Bitcoin in early August 2024 highlighted risks from unwinding yen-funded carry trades, though interpretations of this event remain subject to debate. The BOJ’s policy shift marks a significant departure from its long-standing ultra-loose stance, signaling a potential turning point in Japan’s monetary strategy.
Written by Kate Harper
Economics Desk
