Tokyo, Sept. 18 (SANA)The Bank of Japan raised its benchmark interest rate on Friday from 1.0% to 1.25%, marking its highest level in 31 years to counter inflationary pressures, particularly driven by risingenergycosts.

The decision was approved by a 7–2 vote following a two-day policy meeting, Reuters reported. The central bank noted that economic and inflation trends align with its forecasts while warning of risks should core inflation deviate from its 2.0% target.

The bank highlighted that wholesaleinflationremains high and price pressures from corporate transactions are beginning to pass through to consumers, keeping the door open for further monetary policy tightening.

Despite the rate hike, the Japanese yen slipped to 156.91 against the US dollar as markets await comments from Governor Kazuo Ueda regarding the pace and timing of potential future increases.

In April, the International Monetary Fund projected Japan’s economic growth to slow to 0.8% in 2026 due to regional conflicts in the Middle East and weakening external demand.