Bank of Japan raises rate to 1.25%, highest in 31 years; bitcoin tops $77,000

September 18, 2026 at 08:03 AM2 min

This digest was compiled by AI from multiple sources — links to the originals are below.

The Bank of Japan raised its benchmark rate by 25 basis points to 1.25% on Friday, the highest in 31 years. The yen weakened and bitcoin rose above $77,000 after the decision. The new rate takes effect Sept. 24, following a 7–2 vote.

Key Facts

The Bank of Japan raised its benchmark interest rate by 25 basis points to 1.25%, the highest level in 31 years.
The BOJ voted 7–2 to lift the target for the uncollateralized overnight call rate, with the new rate taking effect Sept. 24.
Bitcoin's dollar-denominated price jumped to $77,400, extending a rebound from an overnight low of $76,200.
The yen depreciated against the dollar, lifting the USD/JPY pair to 156.70 from 156.20.
The Federal Reserve raised its benchmark rate by 25 basis points to a target range of 3.75%–4.00% earlier this week, its first hike since 2023.

Rate Decision

The Bank of Japan raised its benchmark interest rate by 25 basis points on Friday, lifting it to 1.25%, the highest level in 31 years. The BOJ said it acted because of risks that inflation would move above its 2% target, driven by rising import costs and energy prices. The move marks the central bank's second hike in three months and comes weeks after U.S. Treasury Secretary Scott Bessent publicly pressed Tokyo to tighten faster to support the yen. The BOJ voted 7–2 to lift its target for the uncollateralized overnight call rate by 25 basis points, from about 1% to about 1.25%. The new target and related facility rates take effect Sept. 24, so the decision changed the policy path before it changed the official operating rates.

Market Reaction

The yen declined and bitcoin rose after the BOJ hiked rates to the highest level in 31 years. BTC's dollar-denominated price topped $77,000, jumping to $77,400 and extending the rebound from the overnight low of $76,200. The bitcoin-Japanese yen pair (BTC/JPY) listed on Tokyo-based bitFlyer exchange extended gains by 0.5% to JPY 12.06 million following the BOJ rate hike. The Japanese yen depreciated against the U.S. dollar, lifting the USD/JPY pair to 156.70 from 156.20. The yen weakened after the decision, running against the usual pattern of a carry-trade unwind.

Carry Trade Outlook

BOJ rate decisions and yen movements are said to have a bearing on world markets, thanks to a prolonged period of near-zero interest rates in Japan over the past decade or more that led traders to borrow in yen to fund higher-yielding investments elsewhere. Observers have long feared that an unwinding of this so-called carry trade could drag all markets down. The mini-crash in equities and Bitcoin in early August 2024 supposedly offered a glimpse of that risk. Those fears, however, seem overblown because even after the latest 25-basis-point hike, Japanese interest rates remain far below U.S. rates, preserving a wide yield gap that keeps yen-funded carry trades attractive. A sharp yen appreciation alongside falling risk assets would be a stronger warning of unwind pressure.