Bank of Japan hikes rates to 31-year high to battle inflation
The Bank of Japan has raised interest rates to 1.25%, the highest level in over 30 years, to combat inflation driven by energy costs and a weak yen. Despite the hike, the yen remains weak, and officials suggest further increases may be necessary to stabilize the economy.
Why it matters
This shift in Japanese monetary policy signals a move away from long-standing ultra-loose policies, impacting global currency markets and investor strategies.
The Bank of Japan (BoJ) raised interest rates to a more than 30-year high on Friday (September 18, 2026) and said it would lift them further as it looks to counter inflation fuelled by surging energy prices and a weak yen.
The 25-basis-point hike to 1.25% was expected by markets following the recent tightening by the European Central Bank and the U.S. Federal Reserve, though the decision was not unanimous as it was carried by a 7-2 majority vote.
Pressure has increased on officials to further tighten monetary policy as a spike in oil prices caused by the West Asia crisis — which shows little sign of ending anytime soon — is expected to keep putting upward pressure on inflation.
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