The Bank of Japan decided on an additional rate hike at its September Monetary Policy Meeting, guiding the policy rate to around 1.25%. This marks the first rate hike in two meetings since the 1.0% increase in June 2026.
The Bank of Japan held its Monetary Policy Meeting on 17 and 18 September and decided by a majority vote to raise rates further. It raised the target for the uncollateralized overnight call rate to around 1.25%, a level not seen for approximately 31 years, since April 1995. This was the first rate hike in two meetings since the previous increase in June 2026.
2 Policy Board members voted against the decision. Board member Asada Toichiro (浅田統一郎) argued that the policy rate should be maintained in light of the consumer price inflation rate remaining below 2%. Board member Sato Ayano (佐藤綾野) also stated that economic and price conditions had not accelerated significantly compared with the past and that the rate hike was inappropriate.
In its statement, the Bank of Japan assessed that accommodative financial conditions would remain in place even after this rate hike. It maintained its previous policy of raising the policy rate and adjusting the degree of monetary accommodation in accordance with economic and price conditions, pursuing a gradual approach to rate increases.
Regarding domestic economic and price developments, the Bank said they were evolving in line with its previous Outlook for Economic Activity and Prices. At the same time, in light of more aggressive wage- and price-setting behavior and rising inflation expectations, it maintained a cautious stance toward the risk that the underlying rate of inflation could exceed the 2% target. The Bank indicated that it would consider the timing and pace of further rate increases by monitoring developments in the situation in the Middle East, AI-related demand and foreign exchange markets, while examining the likelihood of its outlook being realized and the associated risks.