The central bank's governing board approved a 25 basis point increase to combat rising import costs and currency volatility. This move marks the second rate hike in three months, bringing the policy rate to 1.25% following a 7 to 2 vote. Inflation remains above target, and a weakening yen continues to push domestic prices higher, prompting the Bank of Japan to tighten monetary support to reach its price target.

US Treasury Secretary Scott Bessent requested tighter policy to support the yen and ease pressure on the $32 trillion US Treasury market, creating tension with Prime Minister Sanae Takaichi's push for faster economic growth. Higher rates will increase debt servicing costs, which rise ~30% by 2029. A three day holiday will reduce trading liquidity, and board members Hajime Takata and Naoki Tamura leave in July 2027.