Tokyo — You can almost feel the tension in Tokyo’s financial district. Traders are sipping coffee a little slower, economists are scribbling on legal pads, and currency desks are staring at screens like hawks. It’s not that something dramatic has already happened — it’s what might happen next.
This week brought fresh talk that the Bank of Japan (BOJ) could be eying not just modest increases in interest rates, but a much more aggressive tightening — pushing total hikes toward 150 basis points over time. That idea has been circulating among financial circles and analysts’ forecasts, even though the central bank itself hasn’t committed to that path publicly.
The Unusual Turn in Japan’s Money Policy
For most of the past 30 years, Japan’s monetary policy was extraordinarily easy. Very low, sometimes negative interest rates were the norm. That was the world after Japan’s asset bubble burst in the early 1990s. Policymakers feared deflation more than inflation. But inflation gradually climbed and lingered above the BOJ’s 2 % target — not wildly high, but persistent enough to cause serious conversation.
In December 2025, the Bank of Japan raised its key short-term interest rate by 0.25 percentage points from 0.50 % to 0.75 % — the highest in around three decades. That move wasn’t a shock: markets had mostly priced it in. But what was striking was how participants reacted afterward — not with relief, but with a sense that something more could come.
Why the Buzz About 150 Basis Points?
Officials and some former central bankers have gone on record suggesting that future rate hikes could push the policy rate closer to 1.5 % over the next few years, and that this isn’t just a wild guess. Now here’s where it gets a bit instinctive: markets sometimes behave as if they know more than the central bank itself. After the December rate hike, investors began betting that further increases are on the horizon — not just one or two, but a steady march upward. Bonds yields shot up and yen traders have been pricing expectations into exchange rates.
The Yen’s Mood Swing
The Japanese yen has had an unsettling few weeks. Even with the rate hike, it slipped sharply against other major currencies, testing levels that economists and policymakers don’t like to see. That’s the sort of thing that wakes people up. For years, yen weakness was just shrugged off. Now, it feels charged.
But the Central Bank Isn’t Loudly Shouting Hawkish Intentions
Even while markets price in more hikes, the BOJ hasn’t leaned into that narrative strongly. Governor Kazuo Ueda has repeatedly made it clear that future moves depend on data — inflation trends, wage growth, economic output — not on fixed milestones.
Some analysts say that hesitancy has actually contributed to the yen’s slide. Traders aren’t hearing decisive forward guidance, so they fill in the gaps themselves. It feels a bit like watching someone in a negotiation who won’t show their cards. Observers don’t know whether the BOJ is quietly planning to press ahead — or whether it is cautious because it senses potential economic drag. And markets tend to spin the ambiguity into opportunity.
Real Effects, Not Just Numbers on a Screen
Behind all the talk of “basis points” and “neutral rates” are businesses and households that feel the impact:
Borrowing costs for companies are nudging up.
Mortgage payments on variable loans will climb gradually.
The weaker yen is lifting the prices of imported goods — from fuel to electronics — and that filters into people’s wallets.
Those things don’t show up in a chart overnight, but they shape daily life.
Yet, Japan’s economy isn’t racing ahead thanks to higher rates. Growth remains modest, and some sectors are vulnerable. So the BOJ’s task is delicate: raise rates to keep inflation expectations in check, but not so fast that economic momentum falters.
What’s Next?
The next policy meeting is a few weeks away. Between now and then, markets will be watching inflation data, wage reports, and any shift in central bank language. Traders, analysts, and economists will likely continue whispering — or shouting — about the potential for 150 basis points or more.
And on the streets of Tokyo’s financial district, folks will sip their coffee, glance at their screens, and wonder: is this just the start? Or has the BOJ already peaked for now? That uncertainty, more than any official announcement yet, is what’s really driving conversation this week.