The Bank of Japan raised its policy rate by 25 basis points to 1.25%, the highest level since 1995, in a 7-2 vote with board members Toichiro Asada and Ayano Sato dissenting. The move marked a quicker pace of normalization, coming three months after the BOJ's prior hike versus six months earlier. The BOJ said the decision responded to a risk that inflation could deviate upward beyond its 2 percent target and said it aims to stabilize underlying inflation at "around 2 percent." Japan's headline inflation for August was 1.9 percent while core inflation fell to 1.7 percent from 1.8 percent in July, a point cited by dissenter Asada in arguing for a hold. The yen traded at 156.64 after the decision, weakening 0.45 percent, and the 10-year Japanese government bond yield fell 4.9 basis points to 2.947 percent. The hike followed public pressure from U.S. Treasury Secretary Scott Bessent, who urged the BOJ at the G20 to take "decisive market and monetary steps," and economists surveyed by CNBC mostly expected the 25 basis point tightening.
