The Bank of Japan has raised its benchmark interest rate to 1.25%, according to 경향신문, marking the country's highest policy rate in 31 years. The decision was reported on Saturday, September 19, 2026.
Seoul Economic TV reported that worries about a disorderly unwinding of yen carry trades remain "limited" despite the rate increase. A yen carry trade typically involves borrowing in yen at low cost and investing in higher-yielding assets elsewhere.
The rate hike has already begun to feed through to Japanese commercial lenders. 연합뉴스 reported that deposit and lending rates at commercial banks are rising in response, a move expected to increase repayment burdens for households.
Even with higher rates, the yen has continued to weaken, according to a v.daum.net briefing, which examined the reasons behind the currency's renewed slide. 뉴시스 reported that Japanese authorities responded with a "rate check," a step often seen as a signal of readiness to intervene in currency markets.
The combination of a 31-year-high policy rate and a falling yen is unusual, since higher rates would normally support a currency. The reporting points to market expectations and other factors weighing on the yen beyond the policy rate itself.
What to watch next: whether Japanese authorities move from rate checks to actual currency intervention, and how quickly higher borrowing costs pass through to household budgets.