The Bank of Japan raised its benchmark interest rate from 0.5% to 0.75%, reaching a 30-year high. The Policy Board unanimously approved the decision and stated that if economic and price trends align with the outlook, it will continue to raise the policy interest rate and adjust the degree of monetary easing. This article is sourced from an article by Jin10 Data, organized, translated, and written by techflow.
(Background summary: The Bank of Japan “raised interest rates by one basis point to 0.75%”, hitting a 30-year high, with Bitcoin surging to $87,500)
(Additional background: Why did Bitcoin fall first ahead of the Bank of Japan’s rate hike?)

Table of Contents

• Full text of the policy statement
  • Changes in monetary market operation guidelines
  • Japan’s economic activity and prices: current situation and outlook

If future economic and price trends meet expectations, the Bank of Japan will continue to raise the policy interest rate and adjust the degree of monetary easing. On December 19, the Bank of Japan raised its benchmark interest rate from 0.5% to 0.75%, in line with market expectations. The interest rate level is at a 30-year high, and this is the first rate hike in 11 months since January 2025.

Full text of the policy statement

Changes in monetary market operation guidelines

At today’s monetary policy meeting, the Bank of Japan Policy Board unanimously decided to set the following guidelines for monetary market operations between meetings:

The Bank of Japan will guide the unsecured overnight call rate to remain around 0.75%.

Following the adjustment of the monetary market operation guidelines, the Bank of Japan, with a unanimous vote, decided to adjust the applicable interest rates for its related measures.

(1) Supplementary Deposit Facility Applicable Rate

The rate applicable to the Supplementary Deposit Facility ( is the interest rate applied to the portion of the current account balances held by financial institutions at the Bank of Japan, minus statutory reserves ), which is 0.75%.

(2) Basic Loan Rate

The basic loan rate applicable under the Supplementary Loan Facility is 1.0%.

Japan’s overall economy shows a moderate recovery, but some areas remain weak. From the perspective of wage trends, the labor market remains tight, and corporate profits are expected to stay high overall, even considering the impact of tariff policies.

In this context, considering the positions of labor and management in the annual spring labor negotiations, as well as firsthand information collected from the Bank of Japan headquarters and branches, it can be highly assured that, after achieving steady wage increases this year, companies will continue to steadily raise wages next year, and the risk of disruption to active wage-setting behavior is expected to be low.

Although uncertainties around the US economy and trade policies of various economies still exist, related uncertainties have decreased somewhat. Regarding prices, as companies continue to pass wage increases onto sales prices, core consumer price index (CPI) inflation continues to show a moderate upward trend.

Based on recent data and firsthand information, it can be highly assured that, the mechanism of wages and prices rising in tandem at a moderate pace will be maintained. Against this backdrop, in the latter half of the forecast period of the October 2025 “Economic Activity and Price Outlook” ( outlook report ), the likelihood that core CPI inflation will generally align with the 2% price stability target is increasing.

Given the development of the above economic activity and price trends, the Bank of Japan judges that, from the perspective of sustainably and stably achieving the 2% price stability target, it is appropriate to moderately adjust the degree of monetary easing. After the policy rate adjustment, real interest rates are expected to remain significantly negative, and the accommodative financial environment will continue to strongly support economic activity.

Regarding future monetary policy operations, given that current real interest rates are at a notably low level, if the economic activity and price outlook shown in the October 2025 outlook report are realized, the Bank of Japan will continue to raise the policy interest rate and adjust the degree of monetary easing as economic activity and prices improve. Around the 2% price stability target, the Bank of Japan will, from the perspective of sustainably and stably achieving this goal, implement monetary policy in a timely manner based on changes in economic activity, prices, and financial conditions.

Japan’s economic activity and prices: current situation and outlook

Japan’s economy overall shows a moderate recovery, but some areas remain weak. The overseas economy maintains moderate growth overall, but due to trade and other policy impacts across economies, some signs of weakness are also evident. Exports and industrial production are generally flat, but affected by US tariffs.

Corporate profits remain high overall, despite downward impacts from tariffs in manufacturing, and business sentiment remains relatively favorable. In this context, corporate fixed investment shows a moderate upward trend.

Private consumption remains resilient amid improved employment and income conditions but is affected by rising prices. On the other hand, residential investment has declined.

Meanwhile, public investment remains roughly flat overall. The financial environment remains accommodative.

In terms of prices, as wage increases continue to be passed on to sales prices, and influenced by rising food prices such as rice and other factors, the consumer price index (CPI) excluding fresh food has recently maintained a year-on-year increase of about 3%. Inflation expectations are gradually rising.

Due to trade and other policy impacts across economies, overseas economic growth has slowed, affecting the domestic economy through channels such as declining corporate profits. Japan’s economic growth is expected to remain moderate, but an accommodative financial environment and other factors are likely to provide support.

Going forward, as overseas economies regain growth momentum, Japan’s economic growth rate is expected to pick up. As the impact of rising food prices, including rice, gradually diminishes, and partly due to government measures to address rising prices, the year-on-year increase in CPI excluding fresh food is expected to slow below 2% before the first half of fiscal year 2026.

Subsequently, as economic growth accelerates, labor shortages intensify, and medium- to long-term inflation expectations rise, core CPI inflation and CPI excluding fresh food are expected to gradually increase, reaching levels consistent with the price stability target in the latter part of the October 2025 “Economic Activity and Price Outlook” forecast period.

Risks to the outlook include: impacts of trade and other policies affecting overseas economic activity and prices, corporate wage and price-setting behaviors, and developments in financial and foreign exchange markets. It is necessary to pay close attention to how these risks may influence Japan’s economic activity and prices.