Bank of Japan Raises Interest Rate to 0.75%, the Highest Level in Decades

The Bank of Japan unanimously decided to raise its uncollateralized overnight call rate by 25 basis points to 0.75%, the highest level since 1995, and in line with economists expectations. The decision aims to achieve sustainable and stable inflation of 2%. The decision reflects Japan’s moderate economic recovery, tight labor market conditions and rising wages. Firms are expected to keep raising wages in 2026. The BOJ expects the underlying CPI inflation to reach 2% in the second half of the projection period from about 3% currently. Officials said real interest rates will remain significantly negative, and accommodative financial conditions will support economic activity.