Bank of Japan Signals Possible Rate Hike in Early 2025

Policymakers are divided on timing, but signs of inflation and economic progress strengthen prospects for adjustments.

The Bank of Japan's December meeting summary reveals division among policymakers over the timing of a rate hike, with some advocating patience and others suggesting near-term action.
Core inflation in Tokyo accelerated to 2.4% in December, reinforcing expectations for a potential rate hike to 0.5% by March 2025.
Key concerns include uncertainties in the U.S. economy, Japan's wage momentum, and the profitability of smaller firms, which some members believe warrant caution before adjusting rates.
The BOJ ended negative interest rates in March and raised its short-term policy rate to 0.25% in July, signaling readiness for further hikes if inflation and wages align with projections.
The next BOJ policy meeting is scheduled for January 23-24, where analysts anticipate a decision on whether to raise rates further.