Bank of Japan hikes rates again after just three months

Japan’s central bank is tightening faster even as the yen keeps weakening against the dollar. The Bank of Japan lifted its policy rate 25 basis points, from 1.00% to 1.25%, citing the risk that inflation could overshoot its 2% target. The vote was 7-2 as the economy continued recovering moderately.

The hike came just three months after the previous one, the shortest gap between BOJ rate increases since 1990. Higher Japanese rates narrow, but do not close, the gap behind yen-funded carry trades, while government debt remains above 200% of GDP.