Japan Raises Interest Rates to Highest Level in Three Decades

2026, September 18

Japan

The Bank of Japan raised its policy interest rate from 1% to 1.25%, the highest level in 31 years. The decision passed 7-2 and is part of the central bank's continuing move away from the ultra-low interest-rate policies Japan maintained for many years.

The move is important well beyond Japan because the country is one of the world's largest economies and financial markets. Higher Japanese interest rates can affect the yen, borrowing costs, global investment flows and markets internationally. Reuters said the decision was driven by persistent inflation pressures, including higher energy costs linked to the wider Middle East conflict.