Bank of Japan lifts interest rates to a 31-year high as yen sinks after the move

From the Newshound archive · first published 19 September 2026.

The Bank of Japan lifted its key interest rate to 1.25% from 1%, a level not seen since 1995, in a widely anticipated move that marks a shift toward a more pre-emptive approach to fighting inflation. The yen weakened following the decision despite the rate increase.

At 1.25%, the rate is Japan's highest since 1995, representing a dramatic reversal of decades of ultra-loose monetary policy.

The BOJ characterised the move as a pivot toward getting ahead of inflation rather than simply reacting to it.

Markets had anticipated the hike, but the yen's slide after the announcement caught some investors off guard.