Nikkei jumps 1.5% after Bank of Japan raises rates to highest in 30 years; all eyes on Governor Ueda's presser
Published on 19/12/2025 09:32 AM
Bank of Japan's rate hike decision: 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.
Investors also took cues from the strength in overnight trade in the US markets, where a rally in chip stocks lifted all three major Wall Street indexes.
The Nikkei 225 index hit the day's peak of 49,766.96, up 1.5% over the last close of 49,001.50. It had opened nearly 0.8% higher today.
BOJ raised the interest rates to the highest level in 30 years amid sticky inflation and left the door wide open to further tightening beyond the next year.
The BOJ raised short-term interest rates to 0.75% from 0.5% in the first increase since January. The move takes interest rates to levels unseen since 1995. The decision was made by a unanimous vote.
"Given that real interest rates are at significantly low levels, the BOJ will continue to raise interest rates" if its economic and price forecasts materialise, the BOJ said, as per a Reuters report.
This marks another step by the Japanese central bank towards ending decades of huge monetary support and near-zero borrowing costs.
What the market is now looking for is the commentary from the Japanese central bank Governor Kazuo Ueda for clues on the pace and extent of future rate rises — which could impact global markets by changing the yen’s role as a low-cost funding currency.
Dr VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited, said 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.
The yen fell more than 0.3% at 156.02 per dollar after the policy announcement, which had largely been factored in by markets.
The benchmark 10-year Japanese government bond (JGB) yield rose 3.5 basis points to hit 2.0%, marking the highest level since May 2006.
(With inputs from agencies)
Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
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