Tokyo – The Bank of Japan (BOJ) announced on Sunday that it has increased its short‑term policy rate to 1.25%, the strongest level the nation has seen since the early 1990s, according to a report by Al Jazeera — All News. The adjustment ends a prolonged period of ultra‑low and negative rates that have characterised Japanese monetary policy for more than a decade.
The central bank said the move reflects a need to curb rising consumer‑price growth that has begun to exceed its 2% inflation target. Recent data indicate that price pressures have been climbing, prompting the BOJ to shift its stance toward a more conventional tightening cycle.
By raising the rate to 1.25%, the BOJ has positioned Japan alongside other major economies that have already begun to tighten monetary conditions in response to global price spikes. Analysts note that the decision could support the yen, which has weakened sharply in recent months, and may influence borrowing costs for households and businesses.
The policy change is expected to affect a range of financial instruments, including government bond yields and loan rates. While the exact impact on the broader economy will unfold over time, the BOJ signalled that further adjustments could follow if inflation remains above target.
Market participants reacted to the announcement with mixed signals. Some investors welcomed the step as a necessary correction to prolonged accommodative policy, while others expressed concern about the potential drag on Japan’s still‑fragile recovery.
The BOJ’s decision arrives as the global economic environment grapples with persistent supply‑chain disruptions and elevated energy prices, factors that have contributed to inflationary pressures worldwide. Japan’s shift underscores a broader trend of central banks moving away from ultra‑easy monetary stances.
The central bank emphasized that its primary objective remains price stability and that future policy actions will be data‑dependent, aligning with its mandate to sustain economic growth while keeping inflation in check.
Reporting attribution: based on reporting by Al Jazeera — All News — original source: https://www.aljazeera.com/news/2026/9/18/japans-interest-rate-hiked-to-31-year-high-at-1-25-as-inflation-rises?traffic_source=rss.