Bank of Japan raises rates to 31-year high, signals further hikes

Japan’s central bank just did something it hasn’t done since Bill Clinton was in the White House and Windows 95 was cutting-edge technology: it pushed interest rates to 1.25%. The Bank of Japan raised its benchmark policy rate by 25 basis points on September 18, marking the highest level since April 1995. The decision passed with a 7-2 vote, and Governor Kazuo Ueda made clear this might not be the last stop on the tightening express. What happened and why it matters The rate hike, decided at the conclusion of a two-day policy board meeting, represents the BOJ’s sixth increase over a roughly 2.5-year normalization campaign that began when it exited negative interest rates back in March 2024. The previous hike brought rates to 1% in June 2026, making this the first move in three months. Two board members weren’t on board. Toichiro Asada and Ayano Sato voted against the increase, arguing that neither inflation acceleration nor economic growth warranted another turn of the screw. Governor Ueda framed the decision as preemptive rather than reactive, indicating that additional rate increases could follow if price pressures continue to intensify, though he also signaled that future decisi...