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The Bank of Japan raised its policy rate by 25 basis points to 1.25% from 1.0%, with the decision passing 7-2. The move puts Japan's benchmark at its highest level in around 31 years.
Why it matters
The BOJ said Japan's economy is recovering moderately, despite weakness linked partly to tensions in the Middle East. It also said underlying inflation is gradually approaching its 2% price stability target, supporting further policy normalization.
The central bank said it will continue raising rates and adjust monetary easing if its economic and price outlook is realized. That signals a conditional tightening path rather than a one-off increase.
Market impact
Higher Japanese rates can raise funding costs for yen-based carry trades, a key risk for leveraged positions across global markets. Investors will focus on the BOJ's inflation outlook, economic data and guidance for the pace of future hikes.
Source: [source](https://www.boj.or.jp/mopo/mpmdeci/mpr_2026/k260918a.pdf)
Frequently asked questions
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What rate did the Bank of Japan set after the latest hike?
The BOJ raised its policy rate by 25 basis points, from 1.0% to 1.25%.
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How did the BOJ vote on the rate increase?
The decision passed by a 7-2 vote.
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Why does the BOJ see room for further rate hikes?
The BOJ said underlying inflation is gradually approaching its 2% price stability target and that it will continue raising rates if its economic and price outlook is realized.
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How can higher Japanese rates affect carry trades?
Higher Japanese rates can raise funding costs for yen-based carry trades and pressure leveraged positions across global markets.
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What will investors watch after the BOJ decision?
Investors will focus on the BOJ's inflation outlook, economic data and guidance on the pace of future rate increases.
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