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The Bank of Japan (BOJ) is reportedly preparing to raise interest rates for the first time in almost a year at its monetary policy meeting in December.
According to Nikkei, raising the policy rate by 25 basis points from 0.5% to 0.75% at the December 18-19 meeting appears to be the strongest option. This move would mark the highest policy interest rate level seen in Japan since 1995.
BOJ Governor Kazuo Oeda and his team are reportedly planning to submit a formal proposal for an interest rate hike to the Policy Board. A majority of the nine-member board, including the governor and vice governors, is expected to support the proposal. At least five votes in favor are required for a resolution to be passed, and currently, no member has explicitly opposed an interest rate increase.
This move will be the BOJ's first interest rate hike since January 2025. Following the bursting of the Japanese bubble in the 1990s, the central bank lowered its benchmark interest rate from 1% to 0.5% in September 1995. The policy rate rising above 0.5% again marks the first time this has happened in nearly 30 years.
On the other hand, it is stated that the Japanese government, led by Prime Minister Sanae Takaichi, has recently become more receptive to interest rate hikes. This strengthens expectations that the BOJ's gradual exit from its long-standing ultra-loose monetary policy may accelerate.
*This is not investment advice.