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2026-09-18 11:04:09
[Bank of Japan Raises Interest Rates by 25 Basis Points to 1.25%, a 31-Year High and the Fastest Pace in 36 Years] (1) The Bank of Japan decided to raise its policy rate by 25 basis points to 1.25%, the highest in 31 years since 1995. This is the first rate hike in three months since the June meeting, and it also means that the pace of rate hikes, which has been roughly once every six months since March 2024, has accelerated. (2) This move aims to curb the risk of further price increases caused by factors such as rising oil prices and the depreciation of the yen. The Bank of Japan passed the decision by a majority vote to raise the target for the unsecured overnight call rate, which serves as the policy rate, to 1.25%; among the nine policy board members, Toshiro Asada and Ayano Sato voted against it. (3) The Bank of Japan issued a statement on Friday after the two-day meeting, saying that the rate hike was in line with the expectations of all economists surveyed. This rate hike is the shortest interval since the June rate hike, the first since 1990, and the fastest pace in 36 years to address rising inflation. (4) Governor Kazuo Ueda will explain the considerations behind the decision and the interest rate path in the coming months at a press conference. The focus of the foreign exchange market has shifted from "whether to raise interest rates" to "how many more interest rate hikes there will be"; many institutions believe that if the Bank of Japan does not release a stronger tightening signal than currently expected, the yen may continue to weaken after the decision. (5) Surveys show that the market generally expects interest rates to continue to rise, reaching 1.5% by the end of March 2027, and rising to 1.75% in the second quarter.
