Bank of Japan Set to Raise Rates to 0.75%, Highest Level in 30 Years: Nikkei

The Bank of Japan (BOJ) is expected to raise its benchmark interest rate to 0.75%, marking the highest level in three decades, according to a report by Nikkei. The decision is likely to be finalized at the BOJ’s upcoming monetary policy meeting on December 18–19, as policymakers move closer to normalizing Japan’s ultra-loose monetary stance.First Rate Hike in Nearly a YearIf implemented, the move would represent a 25 basis point increase from the current 0.5% policy rate, and the first rate hike since January 2025, ending an 11-month pause. A rate of 0.75% would also be Japan’s highest since 1995, underscoring a historic shift for an economy long associated with near-zero interest rates.Broad Support Within the BOJAccording to Nikkei:More than half of the nine-member policy board, including BOJ Governor Kazuo Ueda and the deputy governors, are expected to support the hike.No policy board member has publicly opposed the move.The proposal reportedly has broad backing within the Japanese government.Governor Ueda and other senior BOJ officials have recently signaled openness to tighter policy, reinforcing expectations that a rate increase is now the base case.Final Decision Hinges on Market StabilityThe BOJ is expected to make its final call after closely monitoring market conditions. Officials remain cautious about potential side effects, including:A sharp appreciation of the yenA significant stock market sell-offBroader financial market volatilityIf markets remain stable, analysts see little standing in the way of approval later this week.Why This MattersA move to 0.75% would:Signal growing confidence in Japan’s economic recoveryReflect reduced reliance on extraordinary monetary stimulusPotentially influence global markets, particularly currency and bond flows, given Japan’s role as a major capital exporterFor investors, the decision could have implications for the yen, Japanese equities, global bond yields, and broader risk sentiment.The BOJ’s policy announcement later this week is now shaping up to be one of the most closely watched central bank decisions of the year, both domestically and globally.