FX.co ★ BoJ to Assess Conditions for December Rate Hike

The Bank of Japan is currently evaluating the potential benefits and drawbacks of increasing interest rates during its upcoming meeting on December 18–19, as announced by Governor Kazuo Ueda in a speech on Monday. With the diminishing risk of U.S. tariffs, Ueda indicated that the central bank is increasingly confident that its economic and price forecasts will be achieved, suggesting that the conditions necessary for a rate hike are coming into place. Ueda emphasized the critical role of wage-setting, underscoring the need for the Bank of Japan to determine whether companies' proactive behaviors are likely to continue. Factors such as labor shortages, robust corporate profits, and efforts to stabilize wage increases lend further support to this assessment, with policymakers actively collecting wage data through firm surveys. Ueda mentioned that the bank will carefully analyze domestic and global developments, assess market trends, and consider the advantages of a rate increase. He also pointed out that a depreciated yen could heighten inflation due to increased import costs. Having concluded a decade-long stimulus last year and raised rates to 0.5% in January, the Bank of Japan has since maintained its stance, but persistently high inflation is fueling expectations for another rate adjustment.