The Bank of Japan announced Tuesday it would raise rates to a 31-year high—from 0.75 percent to one percent—in anticipation of continued inflation caused by the Iran War.

In 2024, the Bank of Japan pivoted from decades of near or below zero interest rates amidst supply shocks. It last raised rates in December of 2025 but had held them steady since. However, the energy supply shock caused by the Iran War has created significant price pressures in the country.

Deputy Governor Shinichi Uchida welcomed the framework peace deal announced this week between the U.S. and Iran, but economic analysts expect lingering pressures from the war to persist throughout the year. Japan sources about 90 percent of its crude oil imports through the Strait of Hormuz, leaving it especially vulnerable to Iran’s closure of the sea passage early in the war.

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