Japan Raises Policy Rate to Highest Since 1995

2025-12-19 03:28 By Farida Husna 1 min. read

The Bank of Japan unanimously raised its key short-term interest rate by 25bps to 0.75% at its December meeting, marking the highest level since September 1995 and aligning with market expectations.

The move marked the central bank’s second rate hike this year, following a similar increase in January, underscoring a gradual shift away from its ultra-loose policy stance.

The BoJ said it expects companies to continue delivering steady wage increases in 2026, amid improving corporate profits.

Even so, the board stressed that real interest rates remain “significantly negative” and that overall financial conditions are still broadly accommodative to ensure continued support for economic activity.

Policymakers reiterated that if the outlook presented in October materializes, the board will continue to lift borrowing costs.

The BoJ projected that core consumer price inflation will slow to below its 2% annual target through the first half of FY 2026, before gradually picking up thereafter.



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