BoJ Delivered Widely Anticipated Rate Increase and Signaled Readiness for Future Hikes

Akira Ito
19 Dec, 2025
Tokyo

Japan's indexes advanced after the Bank of Japan delivered a widely anticipated rate hike, and investors reviewed the latest inflation update. 

The Nikkei 225 Stock Average gained 1.1%, the broader Topix increased 0.9%, and the yen approached the 156 mark against the U.S. dollar. 

The Bank of Japan increased its key short-term interest rate by 25 basis points to 0.75%, matching the market expectations. 

The central bank raised rates to the highest level in 30 years after inflation stayed above the policymakers' target rate of 2% for the 44th consecutive month in November. 

The central bank signaled that future rate hikes are likely if its estimate of wage hikes and inflation materializes, confirming market expectations of as many as two rate hikes in 2026.  

Japan's central bank ended its ultra-loose monetary policy last year and raised rates two times to 0.5% as the surging food prices drove the overall inflation rate above the 2% level for nearly four years. 

The Bank of Japan, in its post-meeting statement, reiterated its inflation outlook to converge to 2% before the end of fiscal year 2027. 

The overall inflation eased slightly to 2.9% in November from 3.0% in October, and the core rate, which excludes volatile food prices, held steady at 3.0% during the same period.  

The yield on the 10-year Japanese government bond inched higher by 3.0 basis points to 2.0%, reaching the highest level since May 2026. 

 

Japan Indexes and Stocks 

Benchmark indexes advanced in Tokyo trading on Friday, supported by the BoJ's rate action and higher closing in overnight trading in New York. 

The Nikkei 225 Stock Average increased 1.1% to 49,533.07, and the broader Topix inched higher 0.9% to 3,385.83. 

After a week of volatile trading, the Nikkei 225 Stock Average closed down 1.5%, and the Topix fell 1.2%. 

Softbank Group Holding advanced 6.6% to ¥17,150.0, Tokyo Electron Ltd. increased 3% to ¥31,220.0, and Advantest Corp. added 2.2% to ¥19,235.0. 

Mitsubishi UFJ Financial Group increased 1.5% to ¥2,465.50, Sumitomo Mitsui Financial Group advanced 2.3% to ¥5,025.0, and Mizuho Financial Group gained 1.1% to ¥5,665.0.