BOJ Raises Interest Rates by 25 Basis Points to 1%, Highest Level Since 1995
Miles Bennett
The Bank of Japan raised its benchmark rate by 25 basis points to 1%, the highest since 1995; but Governor Ueda's hospitalization shifted market focus from the hike itself to the forward-guidance signals Deputy Governor Uchida will deliver at the 2:30 p.m. press conference.
A 25 bp hike — what does the number actually mean?
The benchmark rate moves from 0.75% to 1%, in line with expectations — Japan's highest since 1995.
This means → nearly three decades of ultra-low rates are visibly drawing to a close.
In plain terms = money in Japan is no longer "almost free"; borrowing costs are rising in real terms.
What happens to bond purchases?
The current taper stays on track: monthly JGB buying shrinks by ¥200 billion per quarter through Q1 2027.
New wrinkle: from April 2027 the taper pauses, holding monthly purchases at roughly ¥2 trillion.
This means → the BOJ is tightening with one hand and cushioning the bond market with the other — it does not want long-term yields to spike out of control.
Governor absent — does it change the decision?
Governor Kazuo Ueda is hospitalized; he submitted written views but did not vote.
Deputy Governor Shinichi Uchida chairs the press conference and becomes the market's primary signal source.
This reflects a rare situation: the top decision-maker is absent, and traders must read the deputy's wording for clues on the pace of future hikes.
The yen at the 160 line — how much pressure?
USD/JPY hovers near the 160 mark; the yen remains under sustained weakness.
A weak yen pushes up import prices, feeding imported inflation — goods cost more to bring in, and domestic prices follow.
This means → currency depreciation is itself an argument for hiking — without rate increases, the yen risks falling further, making inflation even harder to contain.
Geopolitics and politics — is the BOJ caught in between?
External push: the Middle East conflict drives energy prices higher; combined with yen weakness, upside inflation risk grows, pressing the BOJ to act faster.
Internal pull: the Takaichi government is sensitive to rising rates — hikes raise both government borrowing costs and corporate financing burdens.
In plain terms = on one side, "don't hike and inflation plus the currency spiral"; on the other, "hike too fast and the economy and the government can't absorb it." The BOJ is walking a tightrope.
Content is for reference only, not financial advice.