The Bank of Japan (BoJ) is widely expected by economists and markets to raise its key policy interest rate to a 30-year high of 0.75% at its upcoming monetary policy meeting this week.
🔺️Details of the Expected Rate Hike
🔸️Current Rate: The current policy rate is 0.50%.
🔸️Expected Rate: The central bank is expected to increase the rate by 25 basis points (0.25 percentage points) to 0.75%.
🔸️Timeline: The decision is anticipated on December 19, 2025, following the two-day Policy Board meeting that begins on December 18.
🔸️Historical Context: A rate of 0.75% would be the highest level since September 1995, marking a significant shift from decades of ultra-low or negative interest rates aimed at combating deflation.
🔸️Reasoning: The anticipated move is driven by persistent inflation, which has exceeded the BoJ's 2% target, strong corporate profits, and expectations for sustained wage growth.
The bank aims to normalize monetary policy as it confirms a sustainable shift from deflation to stable inflation.
🔺️Future Outlook
Market expectations suggest this may not be the final hike in the current tightening cycle.
A strong majority of economists polled by Reuters expect the rate to reach at least 1.00% by the end of September 2026.
Some forecasts project the policy rate could climb as high as 1.75% by the end of 2027.
