BOJ Raises Interest Rates to 31-Year High Amid Global Inflation Fears

The Bank of Japan (BOJ) raised interest rates to a 31-year high on September 18, 2026, and signalled its readiness to keep pushing up borrowing costs. The move follows rate hikes by major central banks, including the European Central Bank and the US Federal Reserve, as they focus on global inflation risks driven by soaring oil costs.

The BOJ raised its policy rate to 1.25 per cent from 1 per cent by a 7-2 vote. Dovish board members Toichiro Asada and Ayano Sato dissented to the decision, arguing for patience in pushing up borrowing costs. The move takes interest rates closer to levels the BOJ deems neutral to the economy.

However, the yen sank to 156.91 per US dollar after the announcement, as the usual 25-basis-point hike and the dovish dissenters tempered expectations of bolder tightening. BOJ governor Kazuo Ueda said that underlying inflation approaching 2 per cent has shifted the bank's policy focus.