Bank of Japan Hikes Policy Rate Target to 1.25%
The Bank of Japan has raised its uncollateralized overnight call rate target to 1.25%, citing progress towards achieving its 2% inflation target and continued accommodative financial conditions.
The decision, announced on September 18, 2026, will take effect on September 24, 2026. The Bank of Japan stated that it will continue to raise the policy interest rate and adjust the degree of monetary accommodation as warranted by developments in economic activity, inflation, and financial conditions.
Japan's economy has continued to recover moderately, despite some weakness remaining due to the conflict in the Middle East. Higher crude oil prices have weighed on economic activity and household purchasing power, but government support measures, accommodative financial conditions, and strong global AI-related demand continue to support growth.