BOJ Hikes to 1.25% — 31-Year High, Fastest Tightening Since 1990 — After Bessent's Public Pressure Campaign

BOJ Hikes to 1.25% — 31-Year High, Fastest Tightening Since 1990 — After Bessent's Public Pressure Campaign

Update (Sept 18): The Bank of Japan raised its policy rate from 1.0% to 1.25% — the first hike in three months and the highest level since 1995 — by a 7–2 vote (doves Toichiro Asada and Ayano Sato dissented), and "signalled its readiness to keep pushing up borrowing costs, joining other major central banks in fighting persistent inflation pressures driven by soaring oil costs¹²" (Reuters via Forth). Bloomberg's headline framed it as the fastest pace of hikes since 1990. The move landed 36 hours after the Fed's first hike since 2023 (December Hike Unanimous in Reuters Poll (100/100) as Economists Say Skip October — "Treading Water" Criticism, Peak Seen at 4.00–4.25%, PCE Not Back at 2% Until 2028) — and after an extraordinary pressure campaign by Treasury Secretary Scott Bessent, who in a G20-sidelines meeting with Governor Ueda this month voiced "strong support for 'decisive' monetary steps to combat yen weakness," and who — in agreeing to join Japan's yen-buying intervention — also urged PM Sanae Takaichi's administration to avoid ramping up fiscal stimulus, sources told Reuters.

The BOJ's statement tied the hike directly to the war-driven cost spike: "Wholesale inflation remains elevated and price pressures from business-to-business trading has started to spill over into consumer prices," with "underlying inflation... approaching 2%."

Why it matters for the US cycle: The global tightening wave is now fully synchronized — Fed at 3.75%–4.00%, ECB at 2.5% (hiked last week), BoE on hold but signalling tightening, BOJ at 1.25%. Even after the hike the BOJ still lags its peers, and "the still-wide rate divergence may keep the yen weak against other currencies, pushing up import costs and broader inflation" (Reuters). The yen traded near 156/dollar going into the decision. A hawkish Ueda press conference (0630 GMT) is the next swing factor. Reuters-polled analysts see 1.5% by end-March 2027 and 1.75% by Q2 2027, terminal at least 1.75%. For US households, a BOJ that keeps pace props up the yen and modestly relieves imported-goods inflation pressure; a BOJ that lags keeps the cheap-yen funding channel — and US import price pressure — alive. The open question flagged by critics (and by SCMP's op-ed column) is credibility: how much of this move was Tokyo's own inflation fight versus Washington's currency policy.