At its meeting that concluded Tuesday morning, June 16, the Bank of Japan decided to change its monetary policy, raising interest rates by 25 basis points to 1%, their highest level since 1995. This is the first increase since December, with a majority of members voting 7-1, while member Toichiro Asada voted to keep the rate unchanged.

The Bank’s interest rate report stated that the Japanese economy has recovered moderately, despite some signs of weakness. This is partly due to the impact of the situation in the Middle East, where high oil prices have put pressure. Despite these developments, the Japanese economy remains broadly in line with the baseline scenario, which anticipates moderate growth, albeit at a slower pace.

On the inflation front, the core consumer price index (CPI), which excludes fresh food prices, recently fell below 2% thanks to government measures aimed at mitigating the burden of rising energy costs on households.

Regarding the future of monetary policy, and given that the core inflation rate has approached 2% and that financial conditions have been accommodative, the bank will continue to raise interest rates and adjust the degree of monetary easing in response to developments in economic activity and prices.