TOKYO (AP) — The Bank of Japan raised its benchmark interest rate to 1% on Tuesday, citing challenges stemming from a weak Japanese yen and higher prices.
The central bank's increase in the uncollateralized overnight rate, by a quarter of a percentage point from 0.75%, puts it at a three-decade high.
The central bank has been trying to normalize monetary policy lately after decades of keeping interest rates near or below zero. It adopted ultralow rates to try to encourage more borrowing and spending to counter deflation and pull the economy out of the doldrums.
Inflationary pressures because of the war in Iran, which has sent oil prices soaring in recent months, have hit Japan hard since it imports almost all its oil and gas.
Low interest rates had added to pressures on the Japanese yen, which has fallen lately to about 160 yen to the U.S. dollar.
BOJ Gov. Kazuo Ueda, who has been hospitalized recently, did not attend Tuesday's policy board meeting. Deputy Gov. Shinichi Uchida was expected to take his place at the news conference set for later in the day.
Before the BOJ decision, Tokyo's benchmark Nikkei 225 index briefly topped 70,000 early Tuesday before giving up some of those early gains.
