The Bank of Japan raised its policy rate to 1.25% in a 7-2 vote on September 18, the highest Japanese rate since 1995 and a major step away from the ultra-loose monetary framework that shaped the economy for a generation. The decision followed months of advocacy by US Treasury Secretary Scott Bessent, who pressed Japanese officials to tighten policy, stabilize the weak yen and reduce fiscal excess. The increase was the sixth in the current tightening cycle, after the rate reached 1.00% in June, while Japanese and US authorities coordinated currency intervention in late July and early August to support the yen. Dissenters Toichiro Asada and Ayano Sato cited growth concerns. BOJ Governor Kazuo Ueda said further consecutive increases remain possible, including 50-basis-point moves if conditions warrant. Elevated energy costs and geopolitical instability, including the ongoing conflict in Iran, have kept inflation pressures high. Markets face potential yen strength, less profitable carry trades, pressure on Japanese government bonds and renewed sensitivity among Bitcoin and other risk assets to changes in yen-funded positioning.