Japan Interest Rate

The Bank of Japan’s December minutes showed board members favored continued rate hikes if the outlook for growth and prices holds, while keeping an overall accommodative stance. They judged the economy had recovered moderately, though manufacturing profits faced pressure from U.S. tariffs. Still, the impact had not spread broadly to investment, jobs, or wages. Exports and industrial output were seen as flat, while private consumption remained resilient, supported by income and employment gains, though higher prices weighed somewhat. On inflation, most members expected core CPI to slow below 2% through the first half of fiscal 2026 as food costs ease and government measures curb price pressures. They agreed financial conditions would stay accommodative even with a 0.75% policy rate, noting real rates remain deeply negative. Most stressed policies should be decided on a meeting-by-meeting basis, without a preset pace, based on careful assessment of economic, price, and financial trends.