Japan raises interest rate to new 31-year high

The Bank of Japan has raised its main interest rate to a fresh 31-year high as it continues to move away from decades of ultra-low borrowing costs and as the country faces increasing economic pressures.

In a widely expected move on Friday, the Bank of Japan (BOJ) increased the rate from 1% to 1. 25% - a level not seen since 1995.

Major central banks around the world are hiking rates as higher energy prices caused by the Iran war are helping to push up inflation.

The BOJ has been raising the rate since 2024, when it stood at minus 0. 1%. It has now hiked rates six times in the last two and a half years.

Japan is facing several economic challenges including a persistently weak yen, rising prices and a shrinking workforce.

Official figures published on Friday ahead of the BOJ announcement showed that inflation eased slightly last month.

Core inflation fell to 1. 7% in August from 1. 8% the previous month but remains close to the bank's 2% target level.

The Bank of Japan has stated its intention to continue raising interest rates to combat inflation and maintain economic stability.

However, some analysts have expressed concerns that the rate hikes may have unintended consequences on the Japanese economy.

As the BOJ continues to raise interest rates, investors are watching closely to see how it will impact the Japanese currency and the overall economy.

The move is seen as a response to rising energy prices caused by the Iran war, which has led to higher inflation in Japan.

The Bank of Japan's decision comes ahead of an expected interest rate hike by the US Federal Reserve later this month.

As the global economy continues to face challenges, central banks around the world are working together to address them.

The BOJ's move is part of a broader trend of