Japan Raises Rates to 31-Year High to Ward Off War Inflation
The Bank of Japan joined other major global central banks in raising interest rates to head off an expected spike in inflation fueled by higher energy costs from the war in the Middle East.The bank said on Tuesday that it would raise its benchmark interest rate a quarter of a percentage point to 1 percent — the highest level in 31 years.Citing inflationary pressures from rising crude oil prices, the central bank said it would continue raising interest rates while monitoring prices and the broader economy.Japan, along with much of the rest of the world, is bracing for a surge in prices for oil, gas and other commodities driven by the closure of the Strait of Hormuz.
An agreement between the United States and Iran to reopen the strait is likely to provide relief.Still, economists expect war-related pressures to show up in Japan’s pricing data already this month, and lingering supply-chain strains and higher inflation to persist through the end of the year.The Bank of Japan’s deputy governor, Shinichi Uchida, said at a news conference that the deal to reopen the Strait of Hormuz had reduced risks to the Japanese economy, but that the situation remained uncertain, including how quickly the supply chain may return to normal.“We don’t know what will happen next,” Mr.
Uchida said.The strategy is to get ahead of the coming price surge, drawing lessons from 2022, when Russia’s invasion of Ukraine caused the last major disruption to global energy flows.At the time, the European Central Bank initially described inflation as “transitory” and delayed raising rates, only to see eurozone inflation shoot past 10 percent.This time, the E.C.B.
quickly signaled its intention to tighten and followed through with a rate increase on Thursday.Meanwhile, ahead of the U.S.
Federal Reserve’s first policy meeting this week under its new chairman, Kevin M.Warsh, data showed U.S.
inflation climbing at its fastest pace in three years.We are having trouble retrieving the ...