The Bank of Japan (BOJ) raised Japan’s interest rates by 25 basis points to 1%, in line with expectations and the highest level in more than 30 years, since 1995.
It was the first hike since December 2025, when rates were lifted to 0.75%.
The BOJ said the decision was taken by majority vote, 7 in favor and 1 against, with board member Toichiro Asada preferring to hold rates at 0.75%.
Why the Bank of Japan raised rates: a weak yen and inflation fears
The hawkish stance prevailed overwhelmingly, driven by the weakness of the yen and concerns over a fresh acceleration in inflation stemming from the effects of the US-Iran war.
While Japan’s consumer price index (CPI) inflation is running below 2%, thanks to measures introduced by the government of Prime Minister Sanae Takaichi to ease the burden of high energy costs on households, “the pass-through from higher oil prices is proceeding at a relatively rapid pace in transactions between businesses, which could push up consumer prices across a wide range of goods,” the Bank of Japan said.
The impact of oil prices on inflation is already visible in Japan’s producer price index, which jumped 6.3% in May, its fastest pace of growth in more than three years, driven above all by surging energy costs.
Among today’s decisions, the Bank of Japan also opted to keep reducing its purchases of Japanese government bonds by 200 billion yen (about $1.25 billion) per quarter, before ending the tapering and buying Japanese government bonds (JGBs) worth 2 trillion yen (about $12.5 billion) each month, starting in April 2027.
The rate hike translated into a slight strengthening of the yen, to 160.22 against the dollar, and pushed yields on Japanese government bonds up 3 basis points, to 2.615%.
The Nikkei 225 index on the Tokyo Stock Exchange traded higher, after surpassing the 69,000-point threshold for the first time in its history yesterday on a 4.99% jump.
At the time of writing, the index was up 0.24%, at 69,480.92 points.
Editor’s note
This article was originally published in Italian on money.it by Laura Naka Antonelli on June 16, 2026 as «Giappone, la Bank of Japan alza tassi all’1%, record in più di 30 anni». It has been translated and adapted for an international audience by the Money.it International desk.
