The Bank of Japan has raised the short-term interest rate, specifically the uncollateralized overnight call rate, to around 1.25% from the previous level of around 1.0%. This decision aims to adjust the degree of monetary accommodation in order to achieve the price stability target of 2% in a sustainable and stable manner. Japan's economy has recovered moderately, despite the impact of the situation in the Middle East, and is developing generally in line with the baseline scenario. The increase in global AI-related demand, improvement in the employment and income situation, and the government's various measures have all contributed to this recovery. However, there is a risk that underlying CPI inflation will deviate upward to a level above the price stability target of 2%. The Bank will continue to raise the policy interest rate and adjust the degree of monetary accommodation in response to developments in economic activity and prices as well as financial conditions. The perspective of stabilizing underlying CPI inflation at a level around 2% becomes important, and the Bank will consider the timing and pace of adjustment while examining the likelihood of realizing the baseline scenario and the risks to the outlook. Accommodative financial conditions are expected to be maintained, continuing to firmly support economic activity.