Bank of Japan raises its policy rate to 1.25%

The Bank of Japan raised its policy interest rate by a quarter of a point, from 1% to 1.25%, with effect from Thursday 24 September 2026, according to the central-bank data we track.

A year earlier the rate was 0.5%, so it is now 0.75 points higher over twelve months. Among the 43 central banks on our rates page, that puts it 41st from the top.

The yen rose 0.4% against the US dollar over the past week, and the StocksXray model currently reads USD/JPY as neutral (score -3). See the USD/JPY call for the reasons and the risk levels.

Central banks use the policy rate to steer inflation and growth: raising it makes borrowing dearer and tends to cool demand, cutting it makes borrowing cheaper and tends to support it.

Interest rates are one of the main drivers of currencies: a higher rate usually makes holding a currency more attractive, a lower one less. The effect is often priced in before the decision. Educational context, not a forecast.