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      Bank of Japan Increases Benchmark Interest Rate to 1.25%

      The Bank of Japan (BOJ) has raised its benchmark interest rate by 25 basis points to 1.25%, marking the highest level since April 1995. This decision, made on September 18, 2026, was approved by a 7-2 vote under Governor Kazuo Ueda, who cited persistent inflation risks driven by rising global energy prices and a weakening yen as key factors influencing the move.

      This rate hike follows a previous increase to 1% in June 2026, which was significant as it was the first time Japan's policy rate had surpassed the 1% mark in decades. The BOJ aims to stabilize inflation around its 2% target, but ongoing inflationary pressures, particularly from energy costs exacerbated by geopolitical tensions in the Middle East, have complicated this goal. The weak yen has further increased import costs, affecting consumer prices across various sectors.

      Despite the rate increase, the yen weakened to approximately 157 per dollar following the announcement, indicating skepticism in the markets regarding the BOJ's strategy. Even with the new rate, Japan's benchmark rate remains significantly lower than those of the Federal Reserve and the European Central Bank, which continues to position the yen as a funding currency for carry trades.

      © 2026 KLEA News. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

      Source: KLEA News

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