The Bank of Japan raised its uncollateralized overnight call rate target by 25 basis points to around 1.25% in September by a 7-2 vote, citing an economy and prices developing broadly in line with its baseline scenario, underlying inflation approaching its 2% target and a risk of an upward deviation. Over the past year, it held the target at 0.5% through October 2025, raised it by 25 basis points to 0.75% in December and by another 25 basis points to 1.0% in June 2026. From September 24, the complementary deposit facility rate will be 1.25% and the basic loan rate 1.5%, while climate-response funding will move to a floating loan rate with lending limits. Japan’s economy has recovered moderately despite the Middle East situation, supported by stronger employment and income, while producer-price pressures have begun spilling into consumer prices and medium- to long-term inflation expectations have continued rising. Financial conditions remain accommodative and are expected to continue supporting activity. Key risks include the Middle East situation, expanding global artificial intelligence-related demand and foreign exchange developments. The Bank of Japan said it will continue raising the policy rate and adjusting accommodation in response to economic activity, prices and financial conditions, while assessing the timing and pace against its baseline and outlook risks.
2026-09-18Bank of Japan
Bank of Japan Raises Policy Rate by 25 Basis Points to Around 1.25%
The Bank of Japan voted 7-2 to raise its uncollateralized overnight call rate target by 25 basis points to around 1.25%, citing underlying inflation approaching its 2% target and upside risks. It said it would continue raising the policy rate and adjusting accommodation based on economic activity, prices and financial conditions.