Overview
- Investors largely expect a 25-basis-point increase to about 0.75% at the two-day meeting concluding December 19, the first hike since January and the highest level since the mid‑1990s.
- With the move broadly priced, market reaction is expected to turn on signals about the pace of future tightening rather than the initial decision.
- Reuters-cited sources say the BOJ may update its internal view of the neutral rate but will emphasize real-world effects on bank lending, corporate funding and activity when deciding further moves.
- Persistent inflation above the 2% target for over three years keeps real borrowing costs deeply negative, a point policymakers are likely to stress in arguing for gradual normalization.
- A narrower rate gap could strengthen the yen and challenge carry trades, with analysts noting potential pressure on exporters and the Nikkei as well as rising sensitivity to Japan’s heavy debt-servicing costs.