Bank of Japan Raises Policy Rate to 0.75%, Highest Level Since September 1995

The Bank of Japan raised its policy interest rate to 0.75% on 19 December 2025, delivering a unanimous decision that pushed borrowing costs to their highest level since September 1995. The move extended the central bank's gradual departure from ultra-loose monetary settings.

The policy board voted unanimously in favour of the 25-basis-point increase. The central bank also flagged that further rate increases remained on the table provided the economy continued to track in line with the board's projections.

RATE PATH SINCE 2024

Borrowing costs have not been this high since September 1995. Over the past two years Japan has seen inflation above the BoJ's 2% target alongside rising nominal wages.

For much of the period since the global financial crisis, the BoJ kept its short-term rate target at or below zero and used yield curve control and asset purchase programmes. The BoJ exited negative rates in March 2024, followed by hikes to 0.25% in July 2024, 0.5% in January 2025 and 0.75% in December 2025.

FURTHER HIKES FLAGGED IF ECONOMY STAYS ON TRACK

The central bank stated that it would continue to lift borrowing costs if conditions evolved as expected.

Japanese government bond yields moved higher across the curve, with the 10-year benchmark rising above 2%. The bank said it would conduct monetary policy as appropriate in response to developments in economic activity and prices as well as financial conditions.