Bank of Korea Hikes Rates for First Time in Three and a Half Years as Iran Fuels Inflation

Asia's first domino has tipped toward tightening. The Bank of Korea raised its policy rate by 25 basis points on July 16 — its first hike in three and a half years — with a blunt rationale: containing inflation stoked by the Iran situation. The signal matters beyond Seoul. Japan faces the same Middle East energy squeeze, and its households' inflation expectations just hit a record high; a neighboring central bank has now demonstrated that energy inflation gets answered with rates. The BOJ is still watching for second-round effects, but its external reference frame is tightening. For Taiwanese readers, the won and yen are Taiwan's two big export-competing currencies — Korea's hawkish turn feeds into electronics pricing and the relative appeal of Japanese assets. Watch Korean CPI, the next BOJ meeting, and whether other Asian central banks follow.