The Bank of Japan raised its policy rate to 1.0% in June 2026 and again to 1.25% on September 18, 2026 — a genuinely notable shift after years of near-zero rates. Banks are adjusting their deposit rates in response, so figures change quickly. 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 tend to offer more competitive terms. One example, from the bank’s own announcement:
- Aozora Bank BANK ordinary savings: 1.00% on balances up to JPY 1 million and 0.65% above that until September 30, 2026; from October 1, 2026, 1.20% up to JPY 1 million and 0.75% above (floating, before tax)
- Aozora Bank BANK 1-year time deposit: 1.4% for deposits of JPY 500,000 or more as of October 1, 2026 (before tax)
Note the balance tiers: a headline rate often applies only up to a cap. Check each bank’s current rate page before moving money.
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). It’s withheld at the source and that settles the tax completely — deposit interest isn’t included in your tax return at all.
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) | 1.0% in June 2026, then 1.25% from September 18, 2026 |
| Example online bank rate | Aozora Bank BANK ordinary savings: 1.00% up to JPY 1M (1.20% from Oct 1, 2026) |
| Interest income tax | Flat 20.315%, withheld at source; no return needed |
| 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 — the BOJ raised its policy rate to 1.0% in June 2026 and to 1.25% on September 18, 2026, and banks have followed. Aozora Bank BANK, for example, pays 1.00% on ordinary savings up to JPY 1 million and will raise that to 1.20% from October 1, 2026.
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 at the source, and that settles the tax — deposit interest isn’t included in your tax return.
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 and to 1.25% on September 18, 2026.
- Online banks pay more, but headline rates often apply only up to a balance cap (Aozora Bank BANK: up to JPY 1 million).
- 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.
Sources
Rates and tax rules were checked against the sources below (in Japanese). Deposit rates change often, so check the bank’s current rate page before you move money. (Checked: September 19, 2026)
- Bank of Japan — Change in guideline for market operations (June 16, 2026) Policy rate around 1.0%
- Bank of Japan — Change in guideline for market operations (September 18, 2026) Policy rate around 1.25%
- Aozora Bank — BANK ordinary deposit rate revision Current and October 1, 2026 rates by balance tier
- Aozora Bank BANK — top page (1-year time deposit, BANK The Teiki) 1-year time deposit rate as of October 1, 2026
- NTA Tax Answer No.1310 — Interest income 15.315% + 5% withholding, taxation settled at source