Bank of Japan raises policy rate to 1% – highest level in 31 years

On June 16 2026 the Bank of Japan (BOJ) lifted its short‑term policy rate from 0.75 % to 1 % – the highest short‑term rate since 1995 and a 31‑year high. The move was approved by a 7‑1 vote; Governor Kazuo Ueda did not attend the meeting because he was hospitalized for an infected liver cyst, and Deputy Governor Shinichi Uchida delivered the post‑meeting briefing.

The hike aims to curb inflationary pressure from rising oil prices linked to the Iran‑related energy shock and a weak yen that has boosted import costs. The BOJ warned that price‑pass‑through could push core consumer inflation above its 2 % target. It also signalled that further rate increases are possible, with some analysts forecasting a rise to around 1.25 % by the fourth quarter.

While tightening, the BOJ kept its bond‑purchase programme largely intact, planning to pause the scheduled taper from April 2027 and to continue buying roughly ¥2 trillion of Japanese government bonds each month. Financial markets reacted positively: the Nikkei index broke the 70,000‑point barrier and the yen edged up modestly against the dollar.