The Bank of Japan raised its benchmark interest rate by 25 basis points to 1.25% on September 18, the highest level since 1995, in a 7-2 vote. Toichiro Asada and Ayano Sato dissented. The yen nevertheless weakened toward ¥158 per dollar after Governor Kazuo Ueda and the BOJ failed to signal that faster policy normalization was imminent. The move came shortly before Japan's Silver Week holiday, when reduced trading liquidity could amplify currency swings. Japan's Ministry of Finance conducted interventions totaling roughly ¥11.7 trillion, or about $73 billion, during the April-May 2026 Golden Week period, with spending over the surrounding month reaching $96.4 billion equivalent. Even at 1.25%, Japan's rate remains below those of most major economies, preserving the yen's appeal as a funding currency for carry trades. The BOJ's decision also prompted MUFG Bank, Sumitomo Mitsui Banking Corporation and Mizuho Bank to raise ordinary deposit rates by 0.1 percentage point to 0.5% from November 2. MUFG and Mizuho also raised short-term prime rates from 2.375% to 2.625%, increasing borrowing costs for variable-rate mortgage holders and small businesses. Mizuho Research Institute estimates the rate increase will lift household income by ¥400 billion, or about $2.6 billion, annually, although older savers benefit while younger borrowers face higher costs. Tokyo Shoko Research projects lower profits and a higher loss-making share among small and midsize companies. Markets are watching whether further tightening will come before year-end and whether a move toward ¥160 during holiday-thinned trading would prompt another intervention.