Gold and Silver Fix Prices Continue to Reach Annual Highs

BOJ Delivers Expected 25bps Hike: Inflation-Solid Path Forward and Outlook

The Bank of Japan held its monetary policy meeting on December 19, 2025, and, in line with market expectations, raised the policy rate by 25 basis points from 0.5% to 0.75%, marking the highest level in nearly 30 years since 1995. This also represents the first rate hike in 11 months following the previous increase in January. The decision was unanimously approved by the Policy Board, reflecting a positive outlook for economic activity and prices. Core CPI inflation has remained near the 2% target and has stayed above this level for more than three consecutive years. Following the announcement, the Nikkei 225 index edged up 0.034% to close at 3,371.65, indicating that the market had largely priced in the rate hike. The primary drivers behind the rate increase were persistent inflationary pressures and solid wage growth. A weaker yen has pushed up import costs, with prices rising by more than 5% cumulatively since early 2025, adding to the cost-of-living burden. At the same time, labor shortages have intensified, and the largest labor union is expected to demand wage increases of at least 5% in the 2025 spring wage negotiations, maintaining the elevated level seen in 2024. This is expected to support domestic consumption and economic momentum. In addition, risks related to U.S. tariffs have eased. At the post-meeting press conference, Governor Kazuo Ueda emphasized that economic momentum remains solid and stated that the Bank will respond flexibly based on incoming data at each meeting, without ruling out further adjustments to monetary accommodation. Looking ahead, the Bank of Japan is likely to maintain a pace of one rate hike every six months in the near term, with markets expecting the policy rate to rise further to 1.0% in the first half of 2026. Over the medium term, the policy path will depend on economic conditions and wage trends, and a slowdown could occur if household and corporate confidence weakens. Overall, the benchmark rate is expected to gradually move toward the 1.5% level, which would help stabilize the yen and contain inflation persistence. However, global trade uncertainties remain a key risk. This rate hike reinforces the Bank of Japan’s signal of exiting its ultra-loose monetary policy stance and supports financial market normalization, though investors should continue to monitor Governor Ueda’s remarks and guidance from the January meeting. Read More at Datatrack