Bank of Japan Raises Rate to 31-Year High

Bank of Japan Raises Interest Rate to 1.25%

The Bank of Japan raised its benchmark interest rate from 1 percent to 1.25 percent on September 18, 2026, taking its policy rate to its highest level since 1995. The decision was made at the conclusion of the central bank’s two-day monetary policy meeting in Tokyo.

BOJ Decision Approved by 7-2 Vote

The Bank of Japan’s nine-member policy board approved the increase by a 7-2 vote. Two board members opposed the decision. The 0.25 percentage point increase was widely anticipated by financial markets before the meeting.

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Interest Rate Reaches Highest Level Since 1995

The latest increase takes Japan’s policy rate to 1.25 percent, its highest level in 31 years. The move continues the Bank of Japan’s gradual shift away from the ultra-low interest-rate environment that had characterized Japanese monetary policy for decades.

Inflation Risks Remain a Key Concern

The rate increase comes as the Bank of Japan monitors the risk that inflation could move above its 2 percent price stability target. Higher prices and changes in wage and price expectations are among the factors being watched by policymakers.

Weak Yen and Higher Oil Costs Add Pressure

The Japanese yen has remained under pressure against the U.S. dollar, increasing the cost of imported goods and energy. Higher crude oil prices linked to geopolitical developments have also added to concerns about inflation in Japan.

Japan Continues Monetary Policy Normalization

The latest decision represents another step in Japan’s monetary policy normalization. The Bank of Japan has been gradually moving away from its previous ultra-loose policy as economic and price conditions have changed.

Global Markets Watching the BOJ

The Bank of Japan’s interest-rate decisions are closely followed by global financial markets because changes in Japanese borrowing costs can influence the yen, Japanese bonds, equities and international investment flows. Investors will continue to monitor future policy guidance and economic data.