Bank of Japan raises overnight call rate to 1.25%
The quarter-point increase follows a June hike, marking Japan's most closely spaced tightening moves in years
Published · Updated
UpdateFriday, September 18, 2026 at 3:25 AM ET
Governor Kazuo Ueda said he did not rule out any policy options for further rate increases. He said the bank plans to consult with other central banks about their own rate hike intentions. Ueda also said that while careful analysis is essential, it does not mean the bank should move slowly.
The Bank of Japan raised its overnight call rate to 1.25% from 1%, a 25 basis point increase.
The move follows a hike in June 2026, when the rate rose to around 1%. At its July 31 meeting, the bank had held rates at 1% in an 8-1 vote, with board member Hajime Takata pushing for a move to 1.25% at that time, according to CNBC. Thursday's decision comes three months after the June increase, according to FXStreet, which called it the central bank's most tightly spaced tightening in years amid accelerating core inflation.
Money markets had been pricing in roughly 90 basis points of cumulative hikes over the next 12 months ahead of the decision, FXStreet reported. Currency strategists including Derek Halpenny at MUFG had warned that cautious signaling from Governor Ueda could trigger a yen sell-off, FXStreet reported. Thursday's meeting did not include a quarterly Outlook Report, which accompanies four of the bank's eight annual policy meetings, according to Phemex.
The increase itself lines up with what markets had already priced in through recent yen strength and bond yield moves, leaving little room for a fresh tightening surprise. Prime Minister Takaichi has laid out growth-focused fiscal plans since a cabinet reshuffle, calling for faster policy action and a cycle in which higher tax revenue feeds growth. With the rate move itself unsurprising, what the Bank of Japan says about the pace and flexibility of further hikes now carries more weight for markets than Thursday's decision, particularly with Ueda's stated focus on stabilizing inflation rather than managing the currency.