Economic and event calendar in Asia December 19, 2025 - Bank of Japan rate hike expected

Expected BoJ Rate Hike and Market Reaction

The Bank of Japan (BoJ) is expected to raise rates to 0.75%, marking the highest level in approximately three decades. The market focuses on this decision and the subsequent press conference by Governor Kazuo Ueda. Despite the expected hike, the market does not anticipate a strongly hawkish signal.

Real Rates and Future Outlook

Even after the hike, real interest rates in Japan remain negative, suggesting that policy tightening will be approached cautiously. Some analysts postulate that the next rate increase may not come until October 2026, thus avoiding overly aggressive tightening measures.

Yen Market Outlook

Given that this week’s hike is priced in, the risk of sharp volatility appears minimal. However, future yen movements will largely hinge on forward guidance rather than the hike itself. The USD/JPY pair has struggled around the 156.00 level, necessitating continued vigilance in the lead-up to the BoJ’s announcements.