Japan raises interest rate to highest since 1995
Summary
Japan's central bank raised its main interest rate to 1%, the highest since 1995, to address rising inflation caused by higher energy prices. The Bank of Japan has been increasing rates gradually since March 2024 to move away from decades of very low rates and combat inflation while balancing economic growth.Key Facts
- The Bank of Japan raised its policy interest rate from 0.75% to 1%.
- This is the highest interest rate in Japan since 1995.
- Interest rates had been near zero for about 20 years due to deflation and slow growth.
- Higher global energy prices, worsened by the Iran war, have increased inflation in Japan.
- Japan’s wholesale prices rose over 6% in May compared to last year.
- Overall inflation in Japan was 1.4% in April, below the 2% target set by the Bank of Japan.
- Higher rates may reduce inflation but increase borrowing costs for businesses and the government.
- The Bank of Japan aims to stabilize the yen, which has weakened against major currencies like the US dollar and euro.
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