The Bank of Japan raised its policy rate to 1.0% on June 16, 2026, the highest level since 1995, as it moved to counter inflation fuelled by surging energy prices from the war in Iran.
The central bank lifted the uncollateralised overnight rate by a quarter of a percentage point from 0.75%, its first move since December. The decision marks another step in Japan's gradual exit from decades of near-zero and negative interest rates.
Why now
Japan imports almost all of its oil and gas, leaving it heavily exposed to the spike in energy costs driven by the conflict. Rising wholesale prices have added to inflationary pressure, prompting the BOJ to act.
More to come
The bank pledged further hikes, fuelling speculation of another move before the end of the year as it continues to normalise monetary policy.
Sources: Bloomberg, ABC News, Yahoo Finance.