Japan Raises Its Rate to 1.25%: The Highest in 31 Years

WHAT HAPPENED

The Bank of Japan raised its rate from 1% to 1.25%, the highest level since 1995. It was its third increase since 2024 and the decision was approved by 7 votes to 2.

WHY IT MATTERS

The weak yen makes imported fuels and raw materials more expensive, pushing prices up. The increase also makes mortgages and loans more expensive. Outside of Japan, it may reduce the money flowing into stock markets and emerging markets.

AND FOR YOUR PORTFOLIO

For a long-term investor, Japan matters because for years it offered almost free loans that financed stocks, bonds, and properties in other countries. Higher rates may cause some of that money to return to Japan and increase movements in markets like Latin America.