This move signals the Bank of Japan (BOJ)'s accelerated pace in normalizing monetary policy, occurring just three months after its last adjustment. Previously, the central bank waited six months between actions.

The BOJ's decision followed a similar move by the US Federal Reserve (Fed) just two days prior. This rate hike, a 25 basis point increase, was largely anticipated, with nearly 90% of economists in a CNBC survey expecting the adjustment.

The Bank of Japan aims to stabilize inflation "around 2%". Officials emphasized that prices must not exceed this target significantly, as it would negatively affect Japan's economy.

This rate increase comes as inflation accelerates and the Japanese yen significantly weakens. Tokyo's inflation rate in august was 1.9%. Recently, US officials collaborated with Japan to intervene in currency markets, aiming to strengthen the yen.

Despite the hike, the Japanese yen continued its decline, falling 0.45% against the US dollar to 156.6 JPY per USD. Concurrently, the yield on 10-year Japanese government bonds decreased to 2.94%.

The BOJ's decision did not garner unanimous support from its policy board. Toichiro Asada, one of two dissenting officials, argued against the rate hike, stating the economy was not robust enough to warrant it while core inflation (excluding fresh food) remained below 2%. He advocated for maintaining current rates. Japan's core inflation stood at 1.7% in august.

The United States has consistently urged Japan to tighten its monetary policy, adding pressure to Prime Minister Sanae Takaichi's accommodative monetary and fiscal stance. Earlier this month, US Treasury Secretary Scott Bessent pressed Bank of Japan Governor Kazuo Ueda to "take decisive monetary and market steps" during the G20 finance leaders' meeting.

Ha Thu (according to CNBC, Reuters)