The Bank of Japan (Japan's central bank) raised its benchmark rate by 25 basis points to 1.25%, the highest level Japan has seen since 1995, in a 7-2 vote. The decision exposed a conflict between Prime Minister Sanae Takaichi's growth-focused agenda and US Treasury Secretary Scott Bessent's calls for faster monetary normalization to strengthen the yen and ease pressure on American markets. The yen weakened roughly 1% after the announcement to around 157-158 per dollar, suggesting investors doubt the BOJ can sustain rapid tightening. Governor Kazuo Ueda said underlying inflation was approaching the BOJ's long-standing 2% target and emphasized stabilizing price pressures near that level without overshooting. The two dissenting votes came from board members aligned with Takaichi's growth-first stance. Takaichi has been prime minister since October 2025, and her Liberal Democratic Party won a supermajority in February 2026 elections. The United States and Japan also carried out coordinated yen-buying interventions during summer 2026. The policy tension remains important for currency markets and the yen carry trade, in which investors borrow cheaply in yen to finance higher-yielding positions elsewhere.