Overview
- In a widely expected move, the BOJ raised its short‑term policy rate by 25 basis points to 0.75%, continuing its gradual exit from ultra‑easy policy.
- Inflation has exceeded the 2% target for 44 straight months, with November consumer prices up 2.9% as the bank points to steady wage gains carrying into next year.
- The decision was unanimous, though board members differed on how to characterize underlying inflation, and the statement indicated further hikes remain conditional on the outlook.
- Market reaction was choppy, with the yen briefly firming before weakening toward 156 per dollar as 10‑year JGB yields touched their highest level since May 2006.
- Growth headwinds and fiscal pressures loom, with revised Q3 GDP contracting 0.6% quarter‑on‑quarter and the government rolling out a ¥21.3 trillion stimulus, while analysts see the policy rate reaching around 1% by mid‑2026.