At the Bank of Japan’s monetary policy meeting on 18 September 2026, the guidance target for the unsecured overnight call rate was raised by 0.25 percentage points and set at around 1.25%. Attention focused on the move, which signalled an acceleration in the pace of rate hikes, and on the expression “a shift in the policy phase.”
At its policy meeting on 18 September 2026, the Bank of Japan announced that it had raised the guidance target for the unsecured overnight call rate by 0.25 percentage points to around 1.25%. This has been described as clarifying an “acceleration in the pace of rate hikes” roughly three months after the previous rate hike in June, following the start of rate hikes in March 2024. Governor Ueda (植田) used the expression “a shift in the policy phase” at his press conference following the meeting.
The announcement was explained as reflecting the need to consider preventive measures as a second pillar, given the risk that inflation could overshoot owing to factors such as higher crude oil prices while underlying inflation was moving toward 2%. The current rate hikes are said to be proceeding in light of these two pillars.
In terms of the market reaction, the yen weakened, with the exchange-rate move reportedly unfolding in two stages, immediately after the policy meeting and after the Governor’s press conference. One view is that the yen’s weakness was influenced by opposing opinions from 2 policy board members regarded as reflationists, as well as differences in the Federal Reserve’s policy response.
Attention is also focused on the appointment of policy board members from next year onward. Of the 2 members whose terms will end, 1 holds a fixed seat allocated to the banking sector, and the difficulty of raising rates could change depending on whether the number of reflationist members is increased. The final decision is said to depend on the support of the other members.
Meanwhile, Governor Ueda (植田) indicated a cautious stance toward consecutive rate hikes and a large 0.5% rate hike, stating that he would not rule out various possibilities depending on price developments. The view was also suggested that continued high crude oil prices or a prolonged period of yen weakness would require additional vigilance.