The Bank of Japan (BOJ) increased its policy rate by 25 basis points to 1.25% on September 18, 2026. This level marks the highest interest rate in the country since April 1995. The decision followed a two-day meeting and represents the sixth hike in the current tightening cycle, which began in 2024.
The vote passed 7-2, with board members Toichiro Asada and Ayano Sato dissenting. They argued that the Japanese economy lacks the strength to support further tightening. Governor Kazuo Ueda stated that future policy decisions will depend on incoming economic data rather than a predetermined schedule.
Following the announcement, the yen dropped to a two-week low against the US dollar. The USD/JPY pair rose to the 157.84–157.91 range, marking the largest single-day gain for the dollar against the yen since December. Markets had previously anticipated a unanimous decision.
Japanese authorities have signaled they are monitoring the currency closely and remain prepared to intervene if depreciation becomes disorderly. The central bank continues to target an inflation rate of 2%. Analysts note that the split vote may limit expectations for rapid future rate increases.
