Bank of Japan’s Expected Move to 1.25% Puts Funding Costs and Yen Exposure in Focus

Tokyo, 18 September 2026 – The Bank of Japan is expected to raise its benchmark interest rate by 25 basis points to 1.25% as its policy meeting concludes, putting Japanese funding costs and regional currency exposure under renewed scrutiny. The anticipated move would take borrowing costs to their highest level in more than three decades, but an expectation is not a confirmed policy decision.

Current reporting describes a prospective increase from 1%, with the previous rise having occurred in June. Inflation pressures linked to higher energy costs and yen weakness form part of the policy backdrop. Former Japanese currency chief Takehiko Nakao has said an increase to 1.25% is already priced into markets. That assessment describes expectations, not a guarantee that the announcement or subsequent guidance will produce a muted reaction.