The Bank of Japan has raised the interest rate to 1%, the highest level since 1995, amid rising global energy prices.

The central bank of Japan has decided to raise the monetary policy interest rate to 1%, the highest level in the last 31 years, in response to rising global energy prices. This decision was made in the context where other central banks have adopted similar measures, influenced by international conflicts.

The interest rate has been kept near zero for two decades, but recently, Japan has entered a new inflationary cycle, and the Bank of Japan has begun to gradually raise interest rates starting in March 2024. Although overall inflation remains below the 2% threshold, production prices have risen significantly. The BOJ faces a dilemma, as raising interest rates may reduce inflation but makes borrowing more expensive. Additionally, Japan has fallen to third place in the global creditor rankings, being surpassed by Germany and China, despite the record growth of net external assets. This change reflects a global realignment of economies.