Breaking: Bank of Japan hikes interest rates by 25 bps to 0.75%, as expected
The Bank of Japan (BoJ) board members decided to raise the short-term interest rate by 25-basis-point (bps) to 0.75% from 0.50% following the conclusion of its two-day monetary policy review meeting on Friday.
The decision came in line with the market expectations.
The Japanese central bank raised benchmark interest rates to its highest in 30 years, as it seeks to move ahead with policy normalization set forth last year.
Summary of the BoJ policy statement
Summary of the BoJ policy statement
BoJ makes policy decision by unanimous vote.
Real interest rates are expected to remain at significantly low levels.
Will continue to raise policy rate if economy, prices move in line with forecast, in accordance with improvements in economy, prices.
Will conduct monetary policy as appropriate from perspective of sustainably, stably achieving 2% inflation target.
Wage, inflation likely to continue rising moderately in tandem.
Economy has recovered moderately although some weakness seen.
Labour market conditions have continued to be tight, corporate profits to remain at high levels on whole.
Japan's economic growth is likely to be moderate.
The likelihood of realizing the baseline scenario has been rising.
Even after rate change, real interest rates remain deeply negative.
Real interest rates are expected to remain significantly negative.
Even after rate change, monetary environment remains accomodative, support economy.
Considering such factors as labour and management on spring wage talks, highly likely that firms will continue to raise wages steadily next year.
While uncertainties remain over US Economy and impact of trade policy, these uncertainties have declinedunderlying CPI inflation has continued to rise moderately
BoJ board member Takata opposed the description regarding the outlook for prices, considering that the level of therate of increase in the CPI, including underlying CPI inflation, already had generally reached the price stability target.
BoJ board member Tamura opposed description regarding the outlook for underlying CPI inflation.
BoJ board member Tamura considered underlying CPI inflation was likely to be at a level that was generally consistent with theprice stability target from the middle of the projection period.
Likelihood of underlying inflation converging around BoJ target in latter half of BoJ's three-year projection period is heightening
Underlying inflation continues to rise moderately.
Inflation expectations rising moderately.
Consumer inflation likely to fall below 2% towards first half of next fiscal year, then rise thereafter.
Must be vigilant to risks including fx market developements, overseas developments, corporate wage, price-setting behaviour.
Market reaction to the BoJ policy announcements
USD/JPY edges higher above 156.00 in an immediate reaction to the BoJ rate decision. The pair is up 0.28% on the day, as of writing.
Japanese Yen Price This week
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies this week. Japanese Yen was the weakest against the British Pound.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.15% | 0.03% | 0.14% | 0.10% | 0.56% | 0.56% | -0.16% | |
| EUR | -0.15% | -0.13% | -0.02% | -0.07% | 0.42% | 0.39% | -0.30% | |
| GBP | -0.03% | 0.13% | 0.21% | 0.07% | 0.54% | 0.52% | -0.17% | |
| JPY | -0.14% | 0.02% | -0.21% | -0.01% | 0.43% | 0.41% | -0.05% | |
| CAD | -0.10% | 0.07% | -0.07% | 0.01% | 0.47% | 0.46% | -0.08% | |
| AUD | -0.56% | -0.42% | -0.54% | -0.43% | -0.47% | -0.02% | -0.71% | |
| NZD | -0.56% | -0.39% | -0.52% | -0.41% | -0.46% | 0.02% | -0.69% | |
| CHF | 0.16% | 0.30% | 0.17% | 0.05% | 0.08% | 0.71% | 0.69% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote).
This section below was published on December 19 at 00:34 GMT as a preview of the Bank of Japan Interest Rate Decision.
BoJ rate decision Overview
The Bank of Japan (BoJ) will announce its interest rate decision between 03.30 and 05.00 GMT, followed by Governor Kazuo Ueda's press conference at 06.30 GMT.
The BoJ is widely expected to raise interest rates to 0.75% from the current 0.50% at the conclusion of its two-day policy meeting on Friday. This would mark a 30-year high for the policy rate and underscore the central bank's confidence in achieving sustained wage gains and keeping inflation durably around its 2% target.
The Bank of Japan (BoJ) announces its interest rate decision after each of the Bank’s eight scheduled annual meetings. Generally, if the BoJ is hawkish about the inflationary outlook of the economy and raises interest rates it is bullish for the Japanese Yen (JPY). Likewise, if the BoJ has a dovish view on the Japanese economy and keeps interest rates unchanged, or cuts them, it is usually bearish for JPY.
How could the BoJ rate decision affect USD/JPY?
USD/JPY trades on a negative note on the day in the lead up to the BoJ interest rate decision. The pair loses ground after data showed a softer-than-expected rise in US Consumer Price Index (CPI) inflation.
A rate hike will likely strengthen the Japanese Yen (JPY) against the US Dollar (USD). The first upside barrier for the pair is seen in the 155.95-156.00 zone, representing the December 18 high and the psychological mark. The next resistance level emerges at the December 9 high of 156.96, en route to the November 21 high of 157.60.
On the other hand, the December 18 low of 155.28 will offer some comfort to buyers. Extended losses could see a drop to the December 17 low of 154.51. The next contention level is located at the November 7 low of 152.82.
Economic Indicator
BoJ Press Conference
The Bank of Japan (BoJ) holds a press conference at the end of each one of its eight scheduled policy meetings. At the press conference the Governor of the BoJ communicates with media representatives and investors regarding monetary policy. The Governor talks about the factors that affect the most recent interest rate decision, the overall economic outlook, inflation, and clues regarding future monetary policy. Hawkish comments tend to boost the Japanese Yen (JPY), while a dovish message tends to weaken it.
Read more.Next release: Fri Dec 19, 2025 06:30
Frequency: Irregular
Consensus: -
Previous: -
Source: Bank of Japan
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
Author
Lallalit Srijandorn
FXStreet
Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.
