Bank of Japan Poised for December Interest Rate Hike — Markets See It as Almost Certain

Investors have priced in a high probability — around 98 % — that the Bank of Japan (BOJ) will raise its key interest rate at its upcoming policy meeting on December 18–19, 2025. This anticipated move signals a notable shift in Japan’s long-standing monetary policy stance.

According to prediction market data compiled today, almost all traders expect a 25 basis point increase, which would raise the BOJ’s policy rate from 0.50 % to 0.75 % — the highest level in roughly 30 years.

The expected hike comes as inflation in Japan has persistently stayed above the BOJ’s 2 % target, driven in part by higher food costs and improving business sentiment. Meanwhile, a recent quarterly “tankan” survey showed a slight improvement in business confidence, adding support to the case for tightening monetary policy.

While Japan’s rate levels would still be low by global standards, this December move would mark a significant milestone in the BOJ’s long-term exit from near-zero interest rates and decades of ultra-loose policy. It would also underline the central bank’s growing focus on controlling inflation despite economic headwinds.

Market implications:

The yen has strengthened modestly in recent trading as investors adjust to the firming rate outlook.

Global bond markets and risk assets, including stocks and crypto, may react to ripple effects from tighter Japanese monetary policy. Analysts highlight the potential for these moves to influence yen carry trades and risk-asset flows around year-end.

The BOJ’s official decision and accompanying guidance will be closely watched this Friday, potentially setting the tone for policy direction heading into 2026.