How to read the terms: fixed rate versus floating rate (using the BOJ's operation changes as an example)Plain-language (teen-friendly): there are two ways to set the interest when you borrow money
In the minutes of the Monetary Policy Meeting held on September 17 and 18, 2026, published by the Bank of Japan on November 5, 2026, the Board decided unanimously to change the loan rate of the climate response operation and of the operation supporting financial institutions in disaster areas from a fixed rate to a floating rate. It is a case of switching how the rate charged to borrowers is set, and it shows the difference between fixed and floating rates directly. The same way of looking at it applies to your own company's borrowings.
Key points
- With a fixed rate, the rate agreed when you borrow stays the same until the loan is repaid. You know the amount you will pay in advance, but the rate does not fall if market rates fall
- With a floating rate, the rate is reset according to an agreed mechanism. If market rates move, the amount you pay moves too
- In the minutes, it was decided unanimously to change the loan rate of the climate response operation from fixed to floating, to change the loan rate of the operation supporting financial institutions in disaster areas in the same way, and to allow the funds-supplying operation against pooled collateral to use a floating-rate method in addition to the competitive-auction and fixed-rate methods
- As a reason, the minutes record that several members considered the change "well timed, also from the viewpoint of giving financial institutions an appropriate incentive to use the operations in line with economic and financial conditions, while making necessary adjustments to the policy interest rate"
- On financial conditions, the same minutes state that "firms' funding costs have been rising" and that "real interest rates have risen recently but remain at low levels, mainly in the short- to medium-term zone"
What to do in practice
- List your company's borrowings and mark each one as fixed or floating. For floating-rate loans, check in the contract which rate they are linked to and when they are reset
- Work out, for your floating-rate borrowings, how far repayments would rise if rates went up
In the record of its September meeting, released on November 5, the Bank of Japan had decided to change the way interest is set on the money it lends to banks, from fixed to floating. Fixed means the rate agreed when you borrow stays the same all the way until the loan is repaid. Floating means the rate is reviewed partway through, according to an agreed mechanism. Which one you choose decides whether the amount you repay can change or not. Companies and families choose between the same two ways when they borrow.
- 1. Decide how muchDecide the amount you need and over how many years you will repay it
- 2. Choose how the rate is setChoose fixed (the same all the way) or floating (reset partway through)
- 3. If you chose fixedWhether rates in the world go up or down, the amount you repay does not change
- 4. If you chose floatingWhen the reset date comes, the rate is reviewed and repayments may change
Points
- With fixed, the rate agreed at the start stays the same to the end, so you know what you will repay
- With floating, the rate is reset by an agreed mechanism, so if rates in the world go up, repayments go up too
- The Bank of Japan decided unanimously at its September meeting to change the interest on its loans to banks from fixed to floating
What the words mean
- Fixed rate
- A way of setting interest in which the rate agreed when you borrow does not change until repayment
- Floating rate
- A way of setting interest in which the rate is reset partway through, according to an agreed mechanism
- Operation
- A scheme in which the Bank of Japan lends money to banks and so adjusts the amount of money in the economy
- Bank of Japan: Bank of Japan, Minutes of the Monetary Policy Meeting held on September 17 and 18, 2026
Economic news presents published statistics and outlooks. It is not investment solicitation or trading advice. Figures are as of publication and may be revised.
This article summarizes and explains materials published by government agencies and is not advice on any individual case. Rules can change, so for actual procedures and decisions always check the latest original materials and consult professionals such as tax accountants or labor and social security attorneys. English, Simplified Chinese and Traditional Chinese versions are translations prepared from the Japanese articles for convenience. If anything differs, the Japanese text and the original source take precedence.