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On 18 September 2026 the Bank of Japan (BOJ) raised its short-term policy rate by 25 basis points, from 1% to 1.25%, the highest level since 1995.
The board voted 7-2 for the hike, which came just three months after the June 2026 increase, the shortest gap since the BOJ ended negative rates in March 2024.
Japan's core consumer inflation (excluding fresh food) eased to 1.7% in August 2026, close to the BOJ's 2% target.
A weak yen and costlier energy imports, driven by disruptions to shipping through the Strait of Hormuz, added to price pressures.
Negative interest rate policy (-0.1%) ended, the BOJ's first rate hike in 17 years
Policy rate raised to 0.25%
Policy rate raised to 0.5%
Policy rate raised to 0.75%
Policy rate raised to 1% (vote 7-1)
Policy rate raised to 1.25%, highest since 1995 (vote 7-2)
Japan's central bank; sets monetary policy through its Policy Board
The central bank charges banks for parking surplus reserves with it, which pushes them to lend. Japan used NIRP from 2016 to March 2024 to fight deflation. Raising rates now reverses that stimulus.
Simple Analogy: Like a bank that charges you rent for keeping money idle, so you spend it.
GS Paper III > Indian Economy > Monetary policy and global financial developments
General Awareness > Central banks and policy rates
Consider the following statements: Statement-I : In the post-pandemic recent past, many Central Banks worldwide had carried out interest rate hikes. Statement-II : Central Banks generally assume that they have the ability to counteract the rising consumer prices via monetary policy means. Which one of the following is correct in respect of the above statements?
Answer: Both Statement-I and Statement-II are correct and Statement-II is the correct explanation for Statement-I
With reference to Indian economy, consider the following: 1. Bank rate 2. Open market operations 3. Public debt 4. Public revenue Which of the above is/are component/ components of Monetary Policy?
Answer: 1 and 2
The terms 'Marginal Standing Facility Rate' and 'Net Demand and Time Liabilities', sometimes appearing in news, are used in relation to
Answer: banking operations
Which of the following statements is/are correct regarding the Monetary Policy Committee (MPC)? 1. It decides the RBI's benchmark interest rates. 2. It is a 12-member body including the Governor of RBI and is reconstituted every year. 3. It functions under the chairmanship of the Union Finance Minister. Select the correct answer using the code given below:
Answer: 1 only
If the interest rate is decreased in an economy, it will
Answer: increase the investment expenditure in the economy
One-hundredth of a percentage point. 25 bps = 0.25%.
Consumer inflation excluding fresh food, the BOJ's main price gauge.
Raising policy rates or shrinking liquidity to cool demand and inflation.