Bank of Japan’s (BOJ) recent rate decision
📌 What Happened
On December 19, 2025, the Bank of Japan (BOJ) raised its policy interest rate from **0.50% to 0.75%. This is the highest level in about 30 years.
📌 Why It Matters
This was not a rate cut it was a rate increase(tightening). Despite decades of ultra‑low or near‑zero rates, the BOJ is now moving away from that stance.
🔍 Key Reasons
Persistent inflation has stayed above the BOJ’s 2% target for some time, prompting the move to tighten policy.
Japan’s economy has seen stronger price pressures, partly due to a weak yen raising import costs.
BOJ Governor Kazuo Ueda emphasized the decision is data‑dependent, and future hikes will depend on inflation, wages, and economic conditions.
📊 Market and Economic Impact
The yen weakened against the U.S. dollar after the announcement, despite the rate rise, partly because BOJ offered limited guidance on future increases.
Japanese government bond yields rose to multi‑year highs.
📌 Broader Context
This move reflects a shift from ultra‑loose monetary policy economie toward normalization, but the BOJ still maintains rates low relative to other advanced economies.