Financial News: Bank Of Japan Lifts Policy Rate; Hints At

Bank Of Japan Lifts Policy Rate; Hints At More Hikes

12/19/2025 - 06:36:00 (RTTNews)

(RTTNews) - The Bank of Japan raised its benchmark rate by a quarter-point to the highest level in three decades as inflation continued to remain above the target, and also hinted at further rate hikes.

The policy board, headed by Ueda Kazuo decided, by a unanimous vote, to hike the uncollateralized overnight call rate to "around 0.75 percent" from "around 0.5 percent."

The interest rate has reached the highest level since 1995. Previously, the BoJ had lifted the benchmark rate by 25 basis points in January 2025.

Real interest rates are expected to remain significantly negative after the change in the policy rate, and accommodative financial conditions will continue to firmly support economic activity, the bank said.

If economic activity and prices develop as estimated in October, the BoJ will continue to raise the policy rate and adjust the degree of monetary accommodation, the bank said.

However, the statement provided no hints about the timing and magnitude of rate hike.

Economists at ING expect further 25 basis point hike but only in the second half of next year.

It is highly like that the mechanism in which both wages and prices rise moderately will be maintained. The bank viewed that firms are likely to continue to lift wages steadily next year, following the solid wage increases this year.

The possibility of CPI inflation to be at a level that is generally consistent with the price stability target of 2 percent in the second half of the projection period of the October 2025 Outlook report has been rising, the board observed.

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