Japan's central bank has raised the main interest rate in the country to 1%, up from 0.75%, an increase that hasn't been seen in the country since 1995. Following decades of deflation, the situation with Japan's economy appears to have flipped, as the US-Israel war with Iran has pushed up the cost of living and made energy prices soar.
"After twenty years of deflation, Japan is now in an inflationary upcycle," Japan economist Jesper Koll said to the BBC. "Emergency/crisis management monetary policy is no longer needed and the Bank of Japan wants to get back to a normal monetary policy."
Inflation had been at a very low rate in Japan until recently, as higher prices have pushed inflation upwards. The current inflation level is still sitting below the Bank of Japan's target of 2%, and it seems that Japan's overall economy isn't as sharply at risk as it could be, due to government measures easing the impact on housing for fuel costs.
Underlying inflation could go above the current target, but the BOJ is caught in a difficult situation right now. Raising interest makes borrowing costlier, but would keep inflation down. Inflation rising would cause its own series of problems as well.
