Following its December 19-20 policy meeting, the Bank of Japan raised its rate to 0.75%, prompting yen fluctuations, sustained high inflation, bank rate adjustments, and measured government support amid U.S. tariff concerns and shunto wage prospects.
Building on the BOJ's decision to hike its policy rate to around 0.75%—the first since January and highest in 30 years—Governor Kazuo Ueda emphasized at the post-meeting press conference that "it is highly likely the mechanism by which both wages and prices rise moderately will be maintained."
The move accounts for limited impacts from U.S. tariffs under the Trump administration, with Ueda noting, "Corporate earnings are expected to remain at high levels overall." He also anticipates "steady wage increases" in 2026 shunto negotiations similar to this year.
Post-hike, the yen weakened, with dollar-yen at ¥156.73-75 in Tokyo and ¥157.70 in New York. Japan's CPI rose 3.0% year-on-year in November, exceeding the 2% target for 44 months. Analyst Tsuyoshi Ueno of NLI Research Institute warned, "If the rate hike ends here, weak yen persists, potentially forcing moderate further hikes."
Major banks reacted: MUFG, Sumitomo Mitsui Banking, Mizuho, and Sumitomo Mitsui Trust will lift ordinary deposit rates to 0.3% from 0.2% on February 2, 2026—highest since 1993 for some. MUFG and Mizuho raised short-term prime rates to 2.125% from 1.875%, impacting most floating housing loans.
Prime Minister Sanae Takaichi expressed respect for BOJ independence, aligning with recent record supplementary budget for growth.
