The Bank of Japan raised its policy rate to 1.0% in June 2026 — a genuinely notable shift after years of near-zero rates. If you’re a foreign resident deciding where to park your yen savings, here’s what the landscape actually looks like now.
Megabanks vs Online Banks
Japan’s major megabanks — MUFG, Mizuho, SMBC — remain convenient for everyday banking but are rarely where you’ll find the best deposit rates. Online banks have consistently offered more competitive terms:
- Aozora Bank BANK: ordinary savings rate raised to an industry-leading 1.00% from July 1, 2026; a special new-account time deposit offer reaching 1.60%
- Sony Bank: standard time deposit rates aren’t exceptional, but its installment-style time deposit tends to be relatively competitive
- Rakuten Bank: occasionally runs promotional rates tied to its affiliated sports teams’ performance — a quirky but real feature of its offering
How Interest Income Is Taxed
Interest on deposits in Japan is subject to a flat 20.315% withholding tax (15% national income tax, 0.315% special reconstruction tax, and 5% resident tax). This is deducted automatically at the source — you generally don’t need to file anything separately for ordinary deposit interest.
Should You Compare Against Your Home Country’s Rates?
If you still hold savings or accounts back home, it’s worth comparing rates — many countries’ deposit products currently offer higher nominal yields than Japan’s. But before moving money based on rate alone, weigh in currency risk: converting yen into another currency to chase a better rate exposes you to exchange rate swings that can easily outweigh the rate difference over the holding period, especially for short time horizons.
A more practical approach is usually to think about currency by purpose — keep savings you’ll spend in Japan in yen, and only consider converting funds you genuinely don’t need in the near term, with the FX risk clearly in mind.
Quick Summary
| Item | Detail |
|---|---|
| BOJ policy rate (2026) | Raised to 1.0% in June 2026 |
| Best widely-available yen deposit rates | Roughly 1.0%-1.6% at online banks like Aozora Bank BANK |
| Interest income tax | Flat 20.315%, withheld automatically |
| Key risk when comparing internationally | Currency exchange rate movement can outweigh the rate gap |
This article is for general informational purposes only. Deposit rates vary by bank, product, and timing, and change frequently. Moving funds between currencies carries exchange rate risk — always check current rates and consult a financial advisor before making a decision.
Frequently Asked Questions
Q. Did the BOJ’s rate hike actually push deposit rates higher?
A. Yes — after the BOJ raised its policy rate to 1.0% in June 2026, some online banks followed suit, with Aozora Bank BANK raising its ordinary savings rate to an industry-leading 1.00% from July 1, 2026, and a special new-account time deposit reaching 1.60%.
Q. Are megabanks or online banks better for yen savings?
A. Online banks are generally more competitive. Megabanks like MUFG, Mizuho, and SMBC remain convenient for everyday banking but are rarely where you’ll find the best deposit rates.
Q. How is interest income on Japanese deposits taxed?
A. A flat 20.315% (15% national income tax, 0.315% special reconstruction tax, and 5% resident tax) is withheld automatically at the source, so you generally don’t need to file anything separately for ordinary deposit interest.
Q. Should I convert my yen savings to chase higher rates abroad?
A. Be cautious — currency risk from exchange rate swings can easily outweigh the rate difference, especially over short holding periods. It’s more practical to think about currency by purpose: keep savings you’ll spend in Japan in yen, and only consider converting funds you don’t need in the near term.
Key Takeaways
- The BOJ raised its policy rate to 1.0% in June 2026.
- Best widely-available yen deposit rates are roughly 1.0%-1.6%, mainly at online banks like Aozora Bank BANK.
- Interest income is taxed at a flat 20.315%, withheld automatically at the source.
- Currency exchange rate movement can outweigh the rate gap when comparing against overseas deposit rates.