The Bank of Japan increased its benchmark policy rate by 25 basis points to 1.25% on September 18. This decision, reached after a two-day board meeting, marks the highest interest rate level in the country since April 1995.
The policy shift was approved with a 7-2 vote. Board members Toichiro Asada and Ayano Sato opposed the hike, citing insufficient evidence of economic growth or inflation acceleration to justify the move.
This is the sixth rate increase in a 2.5-year normalization campaign that began in March 2024. Governor Kazuo Ueda indicated that further tightening may occur if price pressures persist, though future actions will depend on economic risks.
Following the announcement, the yen weakened to approximately 157 per dollar. Conversely, the Nikkei 225 index rose by about 1.9%.
Between July and August 2026, the central bank conducted market interventions to support the yen, spending approximately $96 billion. These measures were taken to counter currency weakness exacerbated by rising energy costs.
