Bank of Japan Lifted Short-Term Policy Rate to a Three-Decade High

Akira Ito
16 Jun, 2026
Tokyo

Japan's benchmark indexes reversed earlier losses on Tuesday as investors reacted to the latest rate decisions from the central bank. 

The Nikkei 225 Stock Average increased 0.4% and reached to an intraday record high, the broader TOPIX decreased 0.1%, and the yen stayed above 160 levels against the U.S. dollar for the second consecutive week. 

The Bank of Japan raised its short-term reference rate by 25% to 1%, the highest since 1995. 

Policymakers stepped up to contain fallout from Iran's war-driven energy inflation spilling over into the broader economy amid an uncertain geopolitical outlook. 

The central bank raised rates for the first time since December, when it increased rates to 0.75%, and rates have been increased to 1% for the first time since September 1995.

The yield on 10-year Japanese government bonds edged up a fraction to 2.64%, and policymakers struggled to balance the risk of slower economic growth and employment with gathering inflationary pressures.

Despite the three-decade-high interest rate, domestic economic growth remains weak, driven by persistent weakness in wage growth and household spending. 

Moreover, the weakness in the yen persisted because of a wide interest rate differential with the U.S., supporting the carry trade activity and overcoming repeated intervention efforts by the Ministry of Finance.

 

Japan Indexes and Stocks 

The Nikkei 225 Stock Average rose 0.4%, and the broader TOPIX decreased 0.1% to 3,995.57. 

Technology stocks led gainers in Tuesday's trading, tracking overnight gains in New York. The tech-heavy Nasdaq Composite soared 3.1%, and memory and advanced chipmakers surged between 8% and 19%. 

Kioxia Holdings gained 6%, SoftBank Group decreased 0.2%, Tokyo Electron decreased 1.4%, Fujikura Ltd. increased 7.4%, and Advantest Corp. added 4.4%. 

Sumitomo Mitsui Financial decreased 1.3%, Mizuho Financial edged down 0.02%, and Mitsubishi UFJ Financial eased 0.8%.