![\"\"](\"https:\/\/www.newsbeep.com\/ie\/wp-content\/uploads\/2026\/06\/0008e32a-614.jpg\"\/)
<\/p>\nThe Bank of Japan raised interest rates to a 31-year high today, marking another landmark step in normalising monetary policy as it focused on taming price pressures from the energy shock caused by the Iran war.<\/p>\n
The hike was the first since December and aligns the Bank of Japan with other central banks shifting towards tighter policy to combat inflation, including the European Central Bank.<\/p>\n
Deputy Governor Shinichi Uchida acknowledged the recent US-Iranian peace deal, which he described as a “welcome move”, but noted persistent inflationary risks.<\/p>\n
“Compared with the previous meeting, the risk of a sharp deterioration in the economy has diminished. On the other hand, price rises are broadening and there is a risk underlying inflation may deviate from our target,” Uchida said in a news conference he held on behalf of Governor Kazuo Ueda, who missed the meeting for medical treatment.<\/p>\n
In a widely expected move, the Bank of Japan decided to raise its short-term policy rate to 1% from 0.75%, taking borrowing costs to levels unseen since 1995.<\/p>\n
In a statement announcing the decision, the Bank of Japan said the risk of Japan’s economy deteriorating sharply from the Middle East conflict has diminished due to progress made in procuring alternative energy supplies.<\/p>\n
The price outlook, on the other hand, warranted attention as companies were seen passing on rising oil costs to each other at a “relatively fast pace,” which could push up consumer prices across a wide range of items, it said.<\/p>\n
“Taking into account that medium and long-term inflation expectations have also continued to increase, there is a risk of underlying inflation deviating above our price target,” the Bank of Japan said.<\/p>\n
The decision was made by a 7-1 vote. <\/p>\n
<\/p>\n
Governor Kazuo Ueda missed the meeting and did not vote due to a two-week treatment in hospital for an infected liver cyst.<\/p>\n
Toichiro Asada, who joined the board in April as the first member to be hand-picked by dovish premier Sanae Takaichi, dissented on the view downside risks to growth from the Middle East conflict were bigger than inflation risks.<\/p>\n
“If anything, the focus had been on whether a 50-bp rate hike would be proposed, but no such proposal was made. In terms of the future rate-hike path, this is positive for risk asset prices, as it suggests that a sharp rate hike is likely to be avoided,” said Hirofumi Suzuki, chief FX strategist at SMBC.<\/p>\n
“The Bank of Japan is likely to continue raising rates at a gradual pace of around once every six months to one year,” he said.<\/p>\n
The Bank of Japan also decided to pause its bond taper programme from April next year and continue to buy roughly 2 trillion yen ($12.5 billion) in Japanese government bonds (JGB) per month.<\/p>\n
It will discontinue its practice of conducting a review of its bond taper plan each year, but stand ready to amend the pace of purchases if necessary at future policy meetings.<\/p>\n
Broadening inflation risk<\/p>\n
The Middle East conflict has complicated the Bank of Japan’s policy path by adding inflationary pressure through higher oil costs, while hurting an economy heavily reliant on imported fuel.<\/p>\n
While the peace deal between the US and Iran eased market fears over global inflationary pressures, wholesale inflation spiked to a 3-year high of 6.3% in May in a sign companies were already passing on higher costs from the energy shock.<\/p>\n
Analysts expect core consumer inflation to accelerate back above the Bank of Japan’s 2% target later this year, after sliding below the level on government subsidies aimed at curbing utility bills.<\/p>\n
A weak yen, which pushes up import prices and broader inflation, will also keep the Bank of Japan under pressure to stay on course for further rate hikes, analysts say.<\/p>\n
The Bank of Japan’s hike comes amid a busy week for global central banks.<\/p>\n
The US Federal Reserve is widely expected to hold its benchmark interest rate steady tomorrow but officials have recently signaled their rising concern about inflation, which has led more in the market to now predict its next move as being a hike rather than a cut.<\/p>\n
The Bank of England also looks set to keep interest rates at 3.75% on Thursday as Governor Andrew Bailey judges the central bank can take its time to assess if higher energy prices from the Iran war will generate lasting inflation pressure.<\/p>\n","protected":false},"excerpt":{"rendered":"The Bank of Japan raised interest rates to a 31-year high today, marking another landmark step in normalising…\n","protected":false},"author":2,"featured_media":502670,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[72,113,61,60],"class_list":["post-502669","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-business","tag-economy","tag-ie","tag-ireland"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/502669","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/comments?post=502669"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/502669\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media\/502670"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media?parent=502669"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/categories?post=502669"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/tags?post=502669"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}