[Subtitle News] Bank of Japan Raises Key Interest Rate to 1%... "Highest in 31 Years," Will Global 'Domino Rate Hikes' Resume?

The Bank of Japan (BOJ), the country's central bank, has raised its key interest rate for the first time in six months.

According to reports from Kyodo News and others, the Bank of Japan decided at its Monetary Policy Meeting, held over the two days ending yesterday, to raise the short-term policy interest rate by 0.25 percentage points, from the current "around 0.75%" to "around 1%."

With this decision, Japan's key interest rate reaches its highest level in 31 years, since September 1995.

Starting with the end of its negative interest rate policy in March 2024—the first such move in 17 years—the Bank of Japan raised the key rate from the 0–0.1% range to "around 0.25%" in July of the same year.

It subsequently raised the rate to "around 0.5%" in January of last year, and to "around 0.75%" in December of the same year.

Prior to the meeting, market expectations were heavily leaning toward the Bank of Japan raising its policy rate.

Analysts suggest this decision was driven by the judgment that the risk of inflation outweighs the possibility of an economic downturn caused by instability in the Middle East.

This is because Japan's corporate goods price index rose by more than 6% in May, and consumer prices have also significantly exceeded the 2% target.

In a statement released today regarding future monetary policy, the Bank of Japan signaled that it would continue its trend of rate hikes, stating, "We will continue to raise the policy interest rate and adjust the degree of monetary easing in accordance with economic, price, and financial conditions."

With inflation rising due to prolonged instability in the Middle East and energy price hikes stemming from the Strait of Hormuz, market attention is focused on whether central banks around the world will enter a full-scale cycle of interest rate hikes.

On the 11th, the European Central Bank also raised its deposit rate by 0.25 percentage points to 2.25% per annum, marking a shift toward a tightening stance for the first time in about three years. The Bank of Korea has also signaled the possibility of a rate hike ahead of its Monetary Policy Board meeting scheduled for July 16.

Attention is also focused on whether the U.S. Federal Reserve will send hawkish signals regarding future rate hikes at its Federal Open Market Committee (FOMC) meeting, which is being held on June 16–17 (local time).

Meanwhile, as the Bank of Japan's rate hike becomes a reality, observers predict it will have a significant impact on global financial markets as the scale of "yen carry trades"—where investors borrow low-interest yen to invest in overseas assets—is expected to shrink.

Reported by Lee Hyeon-yeong | Video by Kim Na-on | Graphics by Yang Hye-min | Produced by SBS Digital News
※ Please note: This article was translated by AI and may contain errors.