The Bank of Japan (BOJ) has increased its interest rate to 0.75%, the highest level in three decades, signaling a shift towards monetary normalization after years of ultra-loose policies. The rate hike, which was unanimously approved, marks the first increase since January and aims to address persistent inflation, with core consumer inflation reaching 3% in November, surpassing the BOJ's 2% target. The central bank indicated it will continue raising rates if economic and inflation forecasts materialize, despite real interest rates remaining significantly low and accommodative financial conditions supporting economic activity. Market reactions included a rise in Asia-Pacific indices, with Japan’s Nikkei 225 climbing over 0.5% and the yen strengthening against the dollar, which could impact global funding dynamics. The decision comes amid a resilient Japanese economy, with business confidence at a four-year high and wage growth supporting inflation. The BOJ faces the challenge of balancing rate increases without triggering excessive yen appreciation or economic slowdown, with Governor Ueda expected to provide further guidance on future policy moves. Overall, the rate hike reflects Japan’s commitment to achieving sustainable inflation and economic stability, despite ongoing challenges such as high food costs and external pressures from U.S. tariffs and global economic conditions.