Tue, Dec 02, 2025 page9

• BOJ governor sends clear hint at chance of an interest rate increase this month

  ‘ADVANCED NOTICE’: Economists brought forward their rate hike predictions, and the market moved accordingly, with the yen rising as much as 155.4 against the US dollar

  • Bloomberg
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  Bank of Japan (BOJ) Governor Kazuo Ueda sent the clearest hint yet that his board might increase interest rates soon, highlighting the possibility of a move at the bank’s meeting this month.

  The central bank “will consider the pros and cons of raising the policy interest rate and make decisions as appropriate” by examining the economy, inflation and financial markets at home and abroad, Ueda yesterday said during a speech to business leaders in Nagoya, Japan.

  Any hike would be an adjustment in the degree of easing, with the real interest rate still at a very low level, he added.

  

  Bank of Japan Governor Kazuo Ueda speaks during a news conference at the bank’s headquarters in Tokyo on Oct. 30.

  Photo: Bloomberg

  Ueda emphasized that he has had smooth communications with the government, an assertion that might indicate Japanese Prime Minister Sanae Takaichi would not object to a move.

  Takaichi is known to favor dovish policies, but she might be worried that inflation could further damage the ruling Liberal Democratic Party after two bruising election results that reflected frustration over costs of living.

  “I think I’ve had frank, good discussions at face-to-face meetings with the prime minister and economic ministers since last month,” Ueda said. “I intend to continue to keep close communications.”

  BNP Paribas SA economists in a research note wrote that Ueda’s speech was “almost an advance notice” for a hike this month, while economists at Barclays PLC and JPMorgan Securities LLC brought forward their rate hike predictions to this month after previously pegging it for next month.

  Those sentiments were reflected in market moves. Government bonds slumped, with the two-year yield rising to its highest level since 2008, while yields on five-year and benchmark 10-year bonds climbed at least 6.5 basis points each to 1.375 percent and 1.87 percent respectively.

  The yen rose as much as 0.5 percent to 155.4 against the US dollar.

  “Raising the policy interest rate under accommodative financial conditions is about the process of easing off the accelerator as appropriate toward achieving stable economic growth and price developments, not about applying the brakes on economic activity,” Ueda said.

  Ueda spoke after his fellow board members signaled support for raising rates, and two dissenting members called for the action at the past two meetings.

  BOJ board member Junko Koeda said rate normalization should take place without specifying when.

  Another member, Kazuyuki Masu, in an interview with the Nikkei said the timing of the hike is approaching.

  Even dovish member Asahi Noguchi last week mentioned the risk of being too late on any policy change.

  Ueda sketched out both sides of the timing dilemma in his morning remarks. He pointed to the BOJ’s appropriate policy conduct — moving neither too late nor too early — as an approach that would help the economy grow in a sustainable manner.

  Adjusting the degree of accommodation appropriately will be necessary “to guide Japan’s economy onto a long-term growth path, which will ultimately lead to the success of the efforts undertaken by the government and the bank thus far,” he said.
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