Bank of Japan Raises Rates to 30-Year High Amid Inflation

The Bank of Japan has raised its benchmark short-term interest rates by 25 basis points to 0.75%, marking the highest level since 1995. This decision comes amid ongoing inflationary pressures, with consumer prices rising 2.9% in November, surpassing the BOJ's 2% target for 44 consecutive months.

Following the announcement, yields on 10-year Japanese government bonds increased to 2.019%, while the Nikkei 225 stock index rose by 1.28%. Despite the potential risks to the economy, which saw a GDP contraction of 0.6% in the third quarter, the BOJ remains optimistic about a sustained rise in wages and prices, indicating a gradual tightening of monetary policy as it seeks to normalize interest rates after years of negative rates.

The yen weakened slightly against the dollar, trading at 155.92, reflecting market reactions to these fiscal changes.