Bank of Japan raises rates to highest since 1995 after former executive warned of falling behind on inflation

A week after former Bank of Japan executive director Hideo Hayakawa publicly urged the central bank to pick up the pace on rate hikes, the BOJ did exactly that. On June 16, the central bank raised its short-term policy rate by 25 basis points to 1%, marking the highest level since 1995.

The move was the first rate adjustment since December 2025, and it came with hawkish language suggesting more tightening could follow.

Hayakawa’s warning and the BOJ’s response

Hayakawa made his case on June 9, arguing that the BOJ risked falling behind the curve on inflation if it didn’t accelerate its normalization timeline. He suggested a June rate hike was likely, with a potential follow-up increase by October.

Seven days later, the central bank delivered. The 25 basis point increase brought the benchmark rate to 1%, up from 0.75% where it had sat since December 2025.