AFP, TOKYO
The Bank of Japan (BOJ) yesterday hiked interest rates to a 31-year high as it battles inflation caused by the Middle East war — even after Washington and Tehran agreed a peace deal. The central bank for the world’s fourth-largest economy raised its benchmark rate 25 basis points to 1.0 percent, the highest since 1995 and marking the first increase since December last year. “While higher crude oil prices have been exerting downward pressure on economic activity, the economy has generally been supported by factors such as high levels of corporate profits, and an improvement in the employment and income situation,” the BOJ said.
Japan’s flag flutters at the Bank of Japan headquarters in Tokyo yesterday.
The consumer price index (CPI) has been below 2 percent thanks in part to government energy subsidies. “However, the price pass-through stemming from the rise in crude oil prices has been progressing at a relatively fast pace in business-to-business transactions, which could spread to an increase in consumer prices across a wide range of items,” the central bank added. “Against this backdrop, taking into account that medium to long-term inflation expectations have also continued to rise, there is a risk of underlying CPI inflation deviating upward to a level above the price stability target of two percent.”
