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Bank of Japan raises policy rate to 1.25%, highest since 1995

TheWorldCorresp reports a 7–2 vote for the September 18, 2026, hike, with the BOJ citing a risk that underlying inflation could exceed its 2% target.

THE WORLD CORRESPONDENTTW
1 Source, 22d ago, first seen 22d ago

TLDR

TheWorldCorresp reports that the Bank of Japan raised its policy rate by 0.25 percentage points to 1.25% on September 18, 2026—its sixth hike since ending negative rates in March 2024. The account says August core inflation, excluding fresh food, stood at 1.7%, but the BOJ projected consumer-price growth above 2% in the second half of fiscal 2026. It also describes rising import prices and companies passing wage-hike costs on through sales prices.

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1 Source, first seen 22d ago

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1 Source

THE WORLD CORRESPONDENT@TheWorldCorrespOn September 18, 2026, the Bank of Japan (BOJ) announced a 25-basis-point hike in its policy rate to 1.25%, marking a 31-year high since 1995. This was the BOJ's sixth rate hike since ending negative interest rates in March 2024 and represented the shortest interval between hikes since 1990—occurring just three months after the June meeting. The decision passed with a 7-2 vote; two "reflationist" board members appointed by Prime Minister Sanae Takaichi cast dissenting votes. **Drivers of the Rate Hike** Upward inflation risk was the core consideration. In its statement, the BOJ explicitly noted that the adjustment to the degree of monetary support was necessary due to the "risk that underlying inflation could exceed the 2% target." While August core CPI (excluding fresh food) stood at 1.7%—below the 2% target—the BOJ projected that CPI growth would accelerate significantly to above 2% in the second half of fiscal year 2026, before easing back to around 2% in the latter half of the forecast period. The impact of rising import prices has begun to materialize, the trend of companies passing wage-hike costs on to sales prices continues, and wholesale prices remain elevated due to oil costs, the yen's depreciation, and demand related to AI. A weak yen posed direct pressure. The yen had previously fallen to a 40-year low, prompting the U.S. and Japan to conduct a joint intervention in August—the first since 2011—to support the currency. U.S. Treasury Secretary Bessent had repeatedly and publicly urged the BOJ to raise rates, stating that a strong yen was "more favorable for U.S. exporters" and bluntly declaring, "I am the house now." Prior to the meeting, BOJ Governor Kazuo Ueda stated, "Monetary conditions remain accommodative, so we intend to continue raising rates."22d
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    1 Source

    THE WORLD CORRESPONDENT@TheWorldCorrespOn September 18, 2026, the Bank of Japan (BOJ) announced a 25-basis-point hike in its policy rate to 1.25%, marking a 31-year high since 1995. This was the BOJ's sixth rate hike since ending negative interest rates in March 2024 and represented the shortest interval between hikes since 1990—occurring just three months after the June meeting. The decision passed with a 7-2 vote; two "reflationist" board members appointed by Prime Minister Sanae Takaichi cast dissenting votes. **Drivers of the Rate Hike** Upward inflation risk was the core consideration. In its statement, the BOJ explicitly noted that the adjustment to the degree of monetary support was necessary due to the "risk that underlying inflation could exceed the 2% target." While August core CPI (excluding fresh food) stood at 1.7%—below the 2% target—the BOJ projected that CPI growth would accelerate significantly to above 2% in the second half of fiscal year 2026, before easing back to around 2% in the latter half of the forecast period. The impact of rising import prices has begun to materialize, the trend of companies passing wage-hike costs on to sales prices continues, and wholesale prices remain elevated due to oil costs, the yen's depreciation, and demand related to AI. A weak yen posed direct pressure. The yen had previously fallen to a 40-year low, prompting the U.S. and Japan to conduct a joint intervention in August—the first since 2011—to support the currency. U.S. Treasury Secretary Bessent had repeatedly and publicly urged the BOJ to raise rates, stating that a strong yen was "more favorable for U.S. exporters" and bluntly declaring, "I am the house now." Prior to the meeting, BOJ Governor Kazuo Ueda stated, "Monetary conditions remain accommodative, so we intend to continue raising rates."22d
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