Bank of Japan lifts benchmark rate to highest level since 1995

The Bank of Japan raised its benchmark interest rate by 25 basis points to 1%, the highest level in almost three decades. The move marks a decisive shift away from the ultra‑loose policy that has defined Japan’s monetary stance since the late 1990s, reflecting sustained consumer‑price growth above the 2% target and the strongest wage gains in decades.

Markets reacted modestly: the Nikkei 225 rose above 70,000, while the yen remained largely unchanged. The BOJ kept its monthly bond‑purchase programme steady at about ¥2 trillion, effectively pausing further quantitative tightening. The decision came amid political pressure from Prime Minister Sanae Takaichi, who favors a weak yen and low rates, and despite Governor Kazuo Ueda’s recent hospitalisation.