Board members of the Bank of Japan (BoJ) decided to raise the short-term interest rate by 25 basis points to 0.75% from 0.50% after the conclusion of the two-day monetary policy review meeting on Friday.
The decision was in line with market expectations.
The Bank of Japan raised benchmark interest rates to their highest levels in 30 years, as it seeks to move forward Normalization of politics provided for last year.
Summary of the Bank of Japan’s policy statement
Summary of the Bank of Japan’s policy statement
The Bank of Japan decides on policy by unanimous vote.
Real interest rates are expected to remain at significantly low levels.
Interest rate hikes will continue if the economy and prices move in line with expectations, based on improvement in the economy and prices.
We will implement monetary policy as appropriate from a sustainable and stable perspective to achieve the 2% inflation target.
Wages and inflation are likely to continue to rise moderately in tandem.
The economy has recovered moderately although some weakness has emerged.
Labor market conditions continued to be tight, and corporate profits generally remained at high levels.
Japan’s economic growth is likely to be moderate.
The probability of achieving the basic scenario is increasing.
Even after the interest rate change, real interest rates remain very negative.
Real interest rates are expected to remain largely negative.
Even after the interest rate changes, the monetary environment remains favorable and supports the economy.
Given factors like labor and management in the spring wage talks, companies will likely continue to raise wages steadily next year.
While there remains uncertainty about the US economy and the impact of trade policy, these uncertainties have eased, and core CPI inflation has continued to rise moderately.
Bank of Japan Board Member Takata disputed the description of price expectations, arguing that the level of the rate of increase in the CPI, including core CPI inflation, has generally already reached the price stability target.
Bank of Japan Board Member Tamura took issue with the description of core CPI inflation expectations.
Bank of Japan Board Member Tamura considered that core CPI inflation is likely to be at a level that is generally consistent with the price stability goal from the middle of the forecast period.
The likelihood of core inflation converging around the BOJ’s target in the latter half of the BOJ’s three-year forecast period is increasing.
Core inflation continues to rise moderately.
Inflation expectations are rising moderately.
Consumer inflation is likely to fall below 2% in the first half of the next fiscal year, and then rise thereafter.
You should be alert to risks including foreign exchange market developments, external developments, corporate wages and price-setting behaviour.
Market reaction to the Bank of Japan’s policy announcements
The USD/JPY pair rose above 156.00 in immediate reaction to the Bank of Japan’s interest rate decision. The pair rose by 0.28% during the day as of writing this report.
The price of the Japanese yen this week
The table below shows the percentage change of the Japanese Yen (JPY) against the major currencies listed this week. The Japanese yen was the weakest against the British pound.
| US dollars | euro | GBP | JPY | Canadian | Australian dollar | New Zealand dollar | Swiss franc | |
|---|---|---|---|---|---|---|---|---|
| US dollars | 0.15% | 0.03% | 0.14% | 0.10% | 0.56% | 0.56% | -0.16% | |
| euro | -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% | |
| Canadian | -0.10% | 0.07% | -0.07% | 0.01% | 0.47% | 0.46% | -0.08% | |
| Australian dollar | -0.56% | -0.42% | -0.54% | -0.43% | -0.47% | -0.02% | -0.71% | |
| New Zealand dollar | -0.56% | -0.39% | -0.52% | -0.41% | -0.46% | 0.02% | -0.69% | |
| Swiss franc | 0.16% | 0.30% | 0.17% | 0.05% | 0.08% | 0.71% | 0.69% |
The heat map shows the percentage changes in major currencies versus each other. The base currency is chosen from the left column, while the counter currency is chosen from the top row. For example, if you select 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 the Japanese Yen (base)/US Dollar (quote).
This section below was published on December 19 at 00:34 GMT as a preview of the Bank of Japan’s interest rate decision.
Overview of the Bank of Japan’s interest rate decision
The Bank of Japan (BoJ) will announce its interest rate decision between 03.30 and 05.00 GMT, followed by a press conference by Governor Kazuo Ueda at 06.30 GMT.
The Bank of Japan 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 represent a 30-year high for the interest rate and underscores the central bank’s confidence in achieving sustainable wage gains and keeping inflation permanently near its 2% target.
The Bank of Japan (BoJ) announces its interest rate decision after each of the bank’s eight scheduled annual meetings. In general, if the Bank of Japan is hawkish on the economy’s inflationary outlook and raises interest rates, it is bullish for the Japanese Yen (JPY). Likewise, if the Bank of Japan has a pessimistic view on the Japanese economy and keeps interest rates unchanged, or lowers them, this is usually a downtrend for the Japanese yen.
How could the Bank of Japan’s interest rate decision affect the USD/JPY pair?
The USD/JPY pair is trading negatively during the day leading up to the Bank of Japan’s interest rate decision. The pair is losing ground after data showed a smaller-than-expected rise in US Consumer Price Index (CPI) inflation.
The interest rate hike is likely to strengthen the Japanese Yen (JPY) against the US Dollar (USD). The pair’s first upward barrier is in the 155.95-156.00 area, which represents the December 18 high and psychological mark. The next resistance level appears at the December 9 high of 156.96, on its way to the November 21 high of 157.60.
On the other hand, the December 18 low at 155.28 will provide some relief to buyers. Extended losses could see a drop to the December 17 low of 154.51. The next competition level is at the lowest level recorded on November 7 at 152.82.
Economic indicator
Bank of Japan press conference
the Bank of Japan The Bank of Japan (BoJ) holds a press conference at the end of each of its eight scheduled policy meetings. At the press conference, the BOJ Governor communicates with media representatives and investors regarding monetary policy. The governor talks about the factors influencing the latest interest rate decision, the general economic outlook, inflation, and clues regarding future monetary policy. Dovish comments tend to strengthen the Japanese yen, while a dovish message tends to weaken it.
Read more.
Next release:
Friday 19 December 2025 at 06:30
repetition:
irregular
consensus:
–
former:
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source:
Bank of Japan
Frequently asked questions about the Japanese Yen
The Japanese Yen (JPY) is one of the most widely traded currencies in the world. Their value is determined broadly by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the spread between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the powers of the Bank of Japan is to control the currency, so its movements are key to the yen. The Bank of Japan has intervened directly in currency markets on occasion, generally to devalue the yen, although it often refrains from doing so due to the political concerns of its major trading partners. The Bank of Japan’s ultra-loose monetary policy between 2013 and 2024 caused the yen to depreciate against its major counterparts due to the growing policy divergence between the Bank of Japan and other major central banks. More recently, the gradual dismantling of this ultra-lenient policy has given the yen some support.
Over the past decade, the Bank of Japan’s ultra-loose monetary policy stance has led to widening policy divergence with other central banks, especially the US Federal Reserve. This supported the widening of the spread between the US and Japanese 10-year bonds, which favored the US dollar against the Japanese yen. The Bank of Japan’s decision in 2024 to gradually abandon ultra-loose policy, along with interest rate cuts at other major central banks, are narrowing this spread.
The Japanese yen is often viewed as a safe investment. This means that in times of market stress, investors are more likely to put their money into the Japanese currency because of its supposed reliability and stability. Turbulent times are likely to strengthen the value of the yen against other currencies that are considered riskier to invest in.
