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Bank of Japan Rate Decision Live: The Bank of Japan (BOJ) raised its key policy rate 25 bps to 0.75%, its highest level since September 1995. This move takes the key rate to a 30-year high, potentially rattling world markets. The BOJ began its final policy meeting of the year Thursday.

The yen weakened against the dollar after the BoJ statement, suggesting the rate hike was fully priced into markets. The yen was down more than 0.3% at 156.02 per dollar

For years, Japan kept interest rates near or below zero to fight deflation, even as other major central banks raised rates sharply after the pandemic. But rising inflationary pressures and improving business sentiment have forced the BOJ to shift its stance, despite Japan’s economy shrinking at a 2.3% annual rate in the last quarter.

One major trigger for the move is the yen’s persistent weakness. The currency has dropped against the U.S. dollar and other major currencies, making imports such as food, fuel and essential goods more expensive. Higher interest rates could help strengthen the yen by attracting more investment into Japanese markets, as global investors look for better returns on yen-denominated assets.

The latest rate hike also signals a broader policy shift, with the BOJ expected to continue “normalising” interest rates in 2026. Any further tightening could influence global markets, since Japan has long been a source of low-cost capital for investors worldwide. A stronger yen or more rate hikes could affect currency trends, bond markets and investor sentiment across Asia, the U.S. and Europe.

Check for Live updates on the BoJ rate hike and its impact on global markets

Asian stocks followed gains in US equities as cooling inflation backed the case for Federal Reserve interest-rate cuts. The yen fell as traders bet the Bank of Japan will stay cautious despite raising rates Friday as expected.

The MSCI Asia Pacific Index rose 0.6%, with technology giants such as SoftBank Group Corp. and Tencent Holdings Ltd. among the biggest contributors. The S&P 500 climbed 0.8% Thursday, while the tech-heavy Nasdaq 100 rose 1.5%. Gains were helped by a solid outlook from giant Micron Technology Inc., easing concerns over artificial intelligence spending and valuations.

The Bank of Japan hiked interest rates as inflation pressures remained well above its target and risks of acting too late increased. The central bank ended its decade-long stimulus programme last year after concluding that Japan was close to sustainably achieving its 2% inflation goal.

Persistently high food prices have kept inflation above target for nearly four years, prompting a growing number of BOJ board members to support further tightening to prevent inflation from becoming too entrenched. Data released on Friday showed core consumer inflation stood at 3.0% in November, unchanged from the previous month and well above the BOJ’s target.

The recent weakening of the yen, which has pushed up import costs and added to broader inflation pressures, further strengthening the case for another rate hike.

In the years after Japan's "bubble" economy burst in the 1990s, the 10-year JGB yield fell below ‍2% ‌in 1999 and never returned above that level, aside from a brief spike to 2.005% on May 10, 2006. The climb in Japanese government bond (JGB) yields has gathered pace since early November.

Yields rose further in early December after Bank of Japan Governor Kazuo Ueda strongly signalled that policymakers were close to considering a resumption of interest-rate hikes.

The benchmark 10-year JGB yield was around 1.65% at the end of October.

The yield on the benchmark 10-year Japanese government bond rose to the highest since May 2006 after the central bank lifted its key policy rate on Friday and signalled further tightening.

The yield climbed 4 basis points to touch 2.005%, topping the 2% level that had acted as a symbolic ceiling during Japan's decades-long struggle with deflation. JGB yields jumped on Friday after the central bank hiked the key rate by ⁠a quarter point to a three-decade high ⁠of 0.75%. While the move was telegraphed in advance by BOJ Governor Kazuo Ueda, the central ⁠bank also said it was ready to continue normalizing policy.

Japan’s key inflation indicator remained at 3% for a second straight month, pointing to continued price pressures in the economy.

Consumer prices excluding fresh food rose 3% year-on-year in November, unchanged from the previous month, according to data released by the Ministry of Internal Affairs and Communications on Friday. The reading was in line with the median estimate of economists.

Headline inflation stood at 2.9%, while growth in a core measure that excludes energy moderated slightly to 3%.

After 17 years, the BoJ ended its era of negative interest rates on March 19, 2024, when it raised rates to a range of 0 to 0.1% from minus 0.1% earlier. Then again, rates were raised on July 31, 2024, to 0.25%. On January 24 this year, the BoJ raised rates to 0.50% and on December 19, rates were elevated to 0.75%. here

Japanese stock markets reacted positively to the Bank of Japan's (BOJ) expected interest rate hike, with the flagship Nikkei 225 surging as much as 1.42% following the announcement on Friday, December 19.

Bitcoin strengthened as the Japanese yen weakened following the Bank of Japan’s (BOJ) widely expected interest rate hike. The Japanese central bank raised its short-term policy rate by 25 basis points to 0.75%, its highest level in nearly 30 years, marking another step away from decades of ultra-loose monetary policy.

Bitcoin, the world’s largest cryptocurrency by market value, climbed from $86,000 to $87,500 before easing slightly to trade near $87,000 at press time, according to CoinDesk data.

Given that real interest rates are at significantly low levels, the BOJ will continue to raise interest ‌rates and adjust the ‍degree of monetary accommodation" if its economic and price forecasts materialise, the Central Bank stated.

"Real interest rates are expected to ‌remain significantly negative after the policy change, and accommodative financial conditions will continue to firmly support economic activity," the BOJ said in a statement announcing the decision.

The yen weakened against the dollar after the BoJ statement, suggesting the rate hike was fully priced into markets. The yen was down more than 0.3% at 156.02 per dollar after the BOJ raised its policy rate to 0.75% from 0.5% in a widely expected move that had been well telegraphed by policymakers.

The euro extended gains to 182.92 yen, ⁠while sterling rose 0.3% to 208.71 yen.

“A lot will depend on the Bank of Japan’s rate decision today. It is almost certain that BoJ will raise rates by 25bp and, therefore, such a decision is unlikely to impact the market. What the market is looking for is the commentary from the Japanese central bank regarding future rate action in the context of inflation in Japan. If the BoJ chief sends a hawkish message indicating more rate hikes, that would impact the market since the market will fear further unwinding of the yen carry trade, triggering more FII outflows from markets like India. Therefore, watch out for the BoJ commentary,” said VK Vijayakumar, Chief Investment Strategist, Geojit Investments.

The rate hike marks the fourth increase since governor Kazuo Ueda took charge of the central bank in 2023. It forms part of the broader monetary policy “normalisation” process he initiated last year and comes after weeks of signals to markets that another rise was imminent.

In its statement accompanying the decision, the BoJ said the move was justified because it was “highly likely that the mechanism in which both wages and prices rise moderately will be maintained.”

The bank decided by a unanimous vote to raise its main rate from 0.5 percent, it said in a statement.

Bank of Japan Rate Decision Live: The BOJ began its final policy meeting of the year Thursday. It's expected to wrap up that meeting by raising its key policy rate by 0.25 percentage points to 0.75%, the highest level since September 1995.

Bank of Japan Rate Decision Live: The Bank of Japan (BOJ) has raised its key policy rate to 0.75%, its highest level since September 1995. The central bank increased the rate by 0.25 percentage points, taking the benchmark to a 30-year high, potentially rattling world markets.

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