Story perspectives

Bank of Japan Raises Rates to 1.25%

By Drooid · Sep 18, 2026, 6:04 AM UTC · How we work

Summary

Story summary

The Bank of Japan raised its benchmark interest rate to 1.25% on September 18, 2026.
The decision passed with a 7-2 vote, as two members objected over sub-2% core inflation.
The yen slipped to about 157 per dollar after the announcement.
The U.S. Federal Reserve raised rates by 25 basis points earlier that week.
The BOJ said underlying inflation is nearing its 2% target, with August CPI at 1.9%.

History

Historical Context

In 1979, Federal Reserve Chairman Paul Volcker launched aggressive rate hikes, raising the federal funds rate from 11% to 20% to fight stagflation. The moves cut Bank of America’s loan growth by $30 billion in 1980 and pushed U.S. Treasury bond yields up 5%. The Bank of Japan’s 1.25% rate rise on September 18, 2026, approved 7-2, mirrors Volcker’s resolve as inflation nears 2% and the yen trades 157 per dollar. Analysts expect the precedent to tighten Japanese credit, strain corporate earnings, and force the Ministry of Finance to revise fiscal targets by 2028.

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Story summary

The Bank of Japan raised its benchmark interest rate to 1.25% on September 18, 2026.
The decision passed with a 7-2 vote, as two members objected over sub-2% core inflation.
The yen slipped to about 157 per dollar after the announcement.
The U.S. Federal Reserve raised rates by 25 basis points earlier that week.
The BOJ said underlying inflation is nearing its 2% target, with August CPI at 1.9%.

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