BOJ Hikes Rates to Three-Decade High, Yen Extends Decline

The Bank of Japan (BOJ) raised its benchmark interest rate by 25 basis points to 1.25% on September 18, 2026, marking the highest borrowing costs in over three decades.

The decision was widely anticipated by financial markets, with a majority of economists pricing in the hike following coordinated signals from Tokyo and Washington regarding currency stability.

However, the policy board was not unanimous, with two dissenting members expressing concern that further tightening could stifle domestic recovery and disproportionately impact small-to-medium enterprises reliant on cheap credit.

Despite the rate hike, the Japanese yen extended its decline against the US dollar and euro in Asian trading hours, with investors interpreting Governor Kazuo Ueda's post-meeting press conference as cautious regarding future increases.