BOJ Likely to Raise Policy Interest Rate as Impact from U.S. Tariffs Believed to Be Muted

The Yomiuri Shimbun

14:46 JST, December 13, 2025

The Bank of Japan is likely to raise its short-term policy rate target to 0.75% from 0.5% at its Policy Board meeting on Thursday and Friday.

Provided markets remain stable and no issues arise, the rate hike is very likely to proceed.

Many within the central bank believe that the impacts of U.S. tariff measures on corporate earnings have been limited and that companies will offer high wage increases in labor-management negotiations next spring.

If the rate is raised to 0.75%, it will be the first time that the policy interest rate has reached a comparably high level since 1995, about 30 years ago, when the then key official discount rate was 1.0%.

“We are actively gathering information on companies’ stances on wage increases through [the central bank’s] head office and branch offices,” said BOJ Gov. Kazuo Ueda in a speechin Nagoya on Dec. 1. “We want to judge whether it will be appropriate to raise the interest rate [based on that information].”

Regarding next spring’s labor negotiations, which the bank says it is paying special attention to, the governor said, “Corporate profits, which fund wage increases, are expected to remain at a high level overall.”

Similar views are shared by many Policy Board members, who have the right to decide monetary policies.

The administration of Prime Minister Sanae Takaichi, which has placed great importance on anti-inflationary measures, is likely to approve the bank’s interest rate hike.

The Consumer Price Index, excluding perishable food, was up 3% in October from a year earlier. The rate of increase has remained above the BOJ target of 2% for three years and seven months.

Rising prices in the country are largely being driven by increasing prices of imported goods resulting from a weak yen. If the interest rate hike is realized and the rate gap between Japan and the United States becomes smaller, it could help correct the weak yen, which has reached as high as the ¥157 range against the dollar.

The central bank decided to raise its policy interest rate to 0.5% at a policy meeting in January. It has kept the rate unchanged in its past six meetings, pointing to high uncertainty over the U.S. economy and its tariff measures.