Japan's central bank interest rate policy, outlook remains unchanged until the first half of 2026

The Bank of Japan’s interest rate decision, which determines the direction of Japanese currency, is expected to remain largely unchanged over the next 1.5 years. EFG Bank economist Sam Johim noted that the rate hike is a gradual adjustment rather than a sudden policy shift, and that the current monetary tightening pace is proceeding at a very moderate level.

Spring labor negotiations are a turning point for policy decisions

The key variable that will influence the future direction of the Bank of Japan’s interest rates is the outcome of the upcoming spring wage negotiations. If wage increases lead to heightened inflation, it could signal a change in the monetary policy stance. Currently, the stance remains cautious, with a continued hold on interest rates while closely monitoring wage and price data.

Financial stability and the appeal of risk assets

As central banks prioritize economic stability and curb illegal fund flows, the attractiveness of risk assets in the market is expected to remain. As long as the accommodative stance of Japan’s monetary policy persists, it is also expected to influence investors’ asset allocation strategies.