Fri, 19 Dec 2025

Fri, 19 Dec 2025 Japan hikes interest rate to highest level since 1995 as inflation bites

It comes as new PM Sanae Takaichi is keen for inflation to fall but also needs low government borrowing costs.

* Japan's central bank, the Bank of Japan (BOJ), has raised its main interest rate to 0.75%, the highest level in 30 years.
* The decision was expected and is seen as a bid to combat inflation, which rose by 3% in November, above the BOJ's target rate of 2%.
* Prime Minister Sanae Takaichi wants inflation to come down but also needs government borrowing costs to be low.
* Raising interest rates tends to increase the value of a country's currency, which can help ease inflation caused by imports.
* However, higher interest rates also push up government borrowing costs.
* Economists expect the BOJ to raise its benchmark interest rate again next year to hit 1%.
* The move marks a historic shift in Japanese policy makers' approach to interest rates after nearly three decades of low rates.
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