Japan’s central bank raises interest rates to highest level since 1995
Summary
Japan’s central bank raised its main interest rate to 1 percent, the highest level since 1995. The Bank of Japan made this change to address rising prices partly caused by the war involving the United States, Israel, and Iran, and to move away from years of very low borrowing costs.Key Facts
- The Bank of Japan raised its benchmark interest rate by 0.25 percentage points to 1 percent.
- This is the first time since 1995 that the rate has been this high.
- The increase is part of efforts to control inflation and end a long period of very low interest rates.
- Rising oil prices, linked to the war involving the US, Israel, and Iran, are causing higher costs for businesses in Japan.
- Japan imports most of its crude oil from the Middle East, making it sensitive to fuel price changes.
- The government has used oil reserves and subsidies to help control energy costs for households.
- Japan’s inflation rate is near the central bank’s 2 percent target, signaling progress toward price stability.
- Japan’s economy grew at a strong pace in early 2024, the fastest growth in 18 months.
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