BOJ lifts rate to 1%, highest since 1995, as inflation risks widen

The Bank of Japan raised its short-term policy rate to 1% from 0.75% on Tuesday, taking borrowing costs to their highest level since 1995 as officials judged inflation risks were broadening across the economy. The decision, approved by a 7-1 vote, was the first increase since December. The central bank said risks of a sharp economic deterioration from the Middle East conflict had eased as Japan secured alternative energy supplies, but companies were passing higher oil costs through at a relatively fast pace. Deputy Gov. Shinichi Uchida, speaking for Gov. Kazuo Ueda during his medical absence, said underlying inflation could rise above the bank's target. The BOJ also said it would pause bond tapering from April 2027 and keep buying roughly 2 trillion yen in government bonds each month.