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Bank of Japan lifts its policy rate to 1.25% and the yen weakens after the decision
September 18, 2026
Japan's central bank lifted its policy rate to 1.25% on Friday, the sixth increase of its tightening cycle, and the currency slipped once the decision landed.
The Bank of Japan began normalizing monetary policy in March 2024 after around three decades of very low inflation or deflation, and has raised its policy rate steadily since then toward levels similar to other major economies.
Key facts
- After the decision the yen stood at 156.64, a slide of 0.45%, while the yield on the 10-year Japanese government bond, the benchmark, dropped 4.9 basis points to 2.947%.
- Core inflation came in at 1.7% for August, a slight easing from the 1.8% recorded a month earlier.
- At this month's G20 gathering of finance ministers and heads of central banks, Scott Bessent, the Treasury Secretary, pressed Kazuo Ueda, the BOJ Governor, to take “decisive market and monetary steps”.
- The two governments acknowledged in August that they had acted together to stop the yen's decline, which had carried it to its weakest point in 40 years.
- Wednesday brought the first increase in the US Federal Reserve's benchmark rate in more than three years, and the European Central Bank had already raised borrowing costs this month.
CNBC reports a quarter point increase that takes the policy rate to 1.25%, and says the bank's own statement pins the decision on the danger of inflation running past its 2% goal. BBC carries the same increase and, alongside CNBC, notes official data released Friday morning showing core inflation cooling to 1.7% in August from 1.8% a month earlier. Bloomberg.com puts the weight on inflation that will not fade, while WSJ leads with the currency and links the decision to a softer yen.
The accounts part on how far back that level reaches. One dates it to 1995; another calls it a 31-year high; another a 30-year high. Everything else about the move lines up: a quarter point step to 1.25%, arriving three months after the previous one rather than six, inside a cycle that opened in March 2024, when the bank began normalizing policy.
CNBC reports the currency at 156.64 once the announcement landed, off by 0.45%, with the yield on Japan's 10-year government bond easing to 2.947%. The same account has Scott Bessent, the US Treasury Secretary, pressing the BOJ's governor, Kazuo Ueda, to take "decisive market and monetary steps" at this month's G20 meeting of central bankers and finance chiefs, and describes Washington leaning on Tokyo to keep tightening. BBC reports that Tokyo and Washington acted together in August to stop the yen's fall, after it sank to its weakest in 40 years, their first such joint move since 2011. Settled across the accounts are the quarter point step to 1.25%, the softer August inflation reading and the yen's decline. Unsettled is how many years separate this level from the last time the rate reached it.
Still developing
The accounts deviate on the years since the rate last stood this high.
How settled the reporting is
Sources
- BBC — Japan raises interest rate to new 31-year high to curb rising prices
- CNBC — Bank of Japan raises interest rates to 31-year high, flags concerns over inflation
Toggle read the full reports of 2 of the 5 outlets counted on this event. The other 3 are counted from their headlines and opening sentences.