Bank of Japan Raises Policy Rate to Highest Level in 30 Years
On 19 December 2025, the Bank of Japan (BoJ) raised its policy rate by 0.25 percentage points to around 0.75%, marking the highest level in 30 years. This increase, the first rate hike since January and the first rise under Prime Minister Sanae Takaichi who took office in October, signals a historic policy shift after nearly three decades of ultra-low interest rates.
The policy board, led by Governor Kazuo Ueda, decided on the rate adjustment amidst inflation excluding food and fuel rising to 3% in November, surpassing the BoJ's 2% target. Prime Minister Takaichi emphasized prioritizing the fight against inflation while maintaining cheap government borrowing costs.
Analysts anticipate the BoJ will continue to raise rates next year, possibly reaching around 1%. This move contrasts with monetary policies of other major central banks, such as the Bank of England with rates at 3.75% and the US Federal Reserve at 3.5–3.75%, which have been loosening their policy settings. The BoJ's decision may impact the yen's value and import costs in Japan.
