Japan and the US Both Raise Rates, Long-Term Interest Rates at Decades-High | September 2026 Economy Explained for Beginners
September 2026 was a month in which the Bank of Japan and the US central bank (the Federal Reserve) raised their policy interest rates just two days apart. By the end of the month, the yield on Japan’s 10-year government bonds reached its highest level in about 30 years, and the yield on US 10-year government bonds reached its highest level in about 24 years. A “world with interest rates” is finally beginning to change the assumptions for household budgets and stock prices. In this article, after directly verifying the published materials (originals) from the Bank of Japan, the Federal Reserve, the Cabinet Office, the Ministry of Internal Affairs and Communications, the Ministry of Health, Labour and Welfare, and others, I will organize the events of September and the latest statistics released through early October in language that is easy for investment beginners to understand.
All numerical values are based on primary sources; calculated figures are labeled as “author’s calculation,” and evaluations or interpretations are clearly labeled as “author’s assessment.”
※This article is based on materials published by October 9, 2026 (Bank of Japan “Change in Guideline for Market Operations” [September 18, 2026], “Tankan (Summary) September 2026” [October 1], Federal Reserve “FOMC statement” [September 16], Cabinet Office “Monthly Economic Report” [September 29], “Preliminary Report on Indices of Business Conditions for August” [October 7], “Economy Watchers Survey for September” [October 8], Ministry of Internal Affairs and Communications “Consumer Price Index, National, August” [September 18], Ministry of Health, Labour and Welfare “Monthly Labour Survey, Preliminary Report for August” [October 7], Ministry of Finance/US Treasury government bond interest rate data, etc.). It does not recommend the buying or selling of any specific financial products.
1. First, in 3 lines—What happened in September 2026
📌 September in 3 lines
・Japan and the US raised rates in the same week: The BOJ raised its policy rate from 1.0% to 1.25% (September 18), and the Fed raised its rate from 3.5–3.75% to 3.75–4.0% (September 16)
・Long-term interest rates in both Japan and the US are at their highest in decades: As of September 30, Japan’s 10-year government bond was at 3.057%, and the US was at 5.29%
・Economic statistics split between “strong” and “weak”: While business sentiment among large companies improved, the Economy Watchers Survey judgment remained below 50
These three points are not isolated events. As prices continue to rise, central banks are raising interest rates, investors are seeking higher yields, and the burden is gradually reaching households and companies—viewing this as a single flow makes it easier to grasp the meaning of the news (this organization is the author’s assessment).
2. The biggest event—The BOJ and the Fed raised rates in the same week
■ BOJ: Policy rate to 1.25%. However, there were two dissenting votes
At its Monetary Policy Meeting on September 18, the Bank of Japan raised its policy interest rate (uncollateralized overnight call rate) from around 1.0% to around 1.25%. This level of 1.25% is reported to be the highest in 31 years since 1995 (TV Asahi NEWS, September 19, 2026). The decision was 7 to 2. The two dissenting members argued for keeping rates unchanged, citing that the rate of increase in prices (consumer prices excluding fresh food) is below 2% and that the economy is not accelerating significantly (BOJ official statement).
If you line up the BOJ’s interest rate hikes over the past year or so, you can see that the intervals are getting shorter.
※Source: Bank of Japan “Change in Guideline for Market Operations” (each decision date). Intervals are author’s calculations.
In its official statement, the BOJ indicated that the underlying inflation rate is approaching 2% and that the current financial environment remains accommodative, expressing its intention to “continue to raise the policy interest rate.” On the other hand, it stated that the timing and pace of hikes will be decided while monitoring the situation in the Middle East, AI-related demand, and the impact of exchange rates.
■ Fed: First rate hike in about 3 years, unanimous
On September 16, the US Federal Reserve (Fed) raised its target range for the policy interest rate by 0.25% to 3.75–4.0%. The vote was a unanimous 12-0, and the statement noted regarding prices that “Inflation remains elevated.” The Fed’s rate hike is the first since July 2023 (to 5.25–5.5%) (Fed official materials).
In the projections of participants released at the same time, the median policy interest rate for the end of 2026 was 4.1%. This is about 0.25% higher than the center of the current target range (3.875%), which is a level that assumes one more rate hike within the year (author’s calculation). However, in the September employment report released on October 2, the increase in non-farm payrolls was limited to 29,000, and the unemployment rate was 4.2% (US Bureau of Labor Statistics). Since it becomes harder to raise rates when employment growth slows, whether there will be an additional rate hike within the year depends on statistics from October onwards (the interpretation in this paragraph is the author’s assessment).
📖 Glossary: What is the difference between policy interest rates and long-term interest rates?
Policy interest rates are the targets for interest rates when banks lend and borrow money for very short periods (often one day), and they are set by the BOJ or the Fed. Long-term interest rates are the yields when the government borrows money for long periods, such as 10 years (government bonds), and these are determined by the supply and demand of investors buying and selling government bonds. The difference is that variable mortgage rates tend to be linked mainly to short-term interest rates, while fixed-rate mortgages and long-term corporate borrowing tend to be linked mainly to long-term interest rates.
🔓 What you will learn from here on (paid section)
・Chapter 3: How many years has it been since long-term interest rates in Japan and the US were this high? — Checking official data going back into the past
・Chapter 4: The sequence of events where the yen exchange rate fluctuated significantly on the day of the rate hike, and the monthly movement of exchange rates
・Chapter 5: Comparing the Tankan, Indices of Business Conditions, Economy Watchers, prices, and real wages in a single table (reflecting data released through October)
・Chapters 6–7: The stock market in September and an organization of household budgets and assets susceptible to the impact of rising interest rates
・Chapters 8–10: Schedule from October onwards, FAQ, summary
The paid section is approximately 4,800 characters and includes 6 tables. I plan to continue organizing the monthly economic movements in this series.