Japan’s central bank has raised its main interest rate to the highest level in 30 years as the country continues to face rising living costs. The Bank of Japan last week increased its benchmark rate by 0.25 percentage points to around 0.75%.

The move marks the first rate hike since January and the first since Prime Minister Sanae Takaichi took office. Takaichi has prioritised curbing inflation while also seeking to keep government borrowing costs low. Higher interest rates tend to support the currency, potentially easing inflation by reducing import costs, but they also increase borrowing expenses for the government.

Official data showed Japan’s inflation rate, excluding food and fuel, rose by 3% in November, remaining above the bank's target rate of 2%. Economists expect one more rate hike next year, possibly bringing the benchmark rate to 1%.