The market generally expects Bank of Japan Governor Ueda Kazuo to raise the benchmark interest rate to the highest level in 30 years on Friday. As the government's demand for cheap financing clashes with the depreciation of the yen driving up import prices, the future policy path is becoming more and more confusing. The new prime minister, Sanae Takaichi, who criticized interest rate hikes last year, is now facing pressure from rising living costs, which has weakened her ruling party's approval rating. Since taking office in October, Japan's first female prime minister has never criticized Kazuo Ueda's plan to reduce monetary easing, and fighting inflation has been made a priority for her. Outsiders generally expect the Bank of Japan Policy Committee to raise the benchmark interest rate by 0.25 percentage points to 0.75% at the end of the two-day meeting on Friday. This is the first time during Ueda and Kazuo's tenure that 50 economists interviewed unanimously anticipated interest rate action. This may also be the first time since July that the central bank's nine-member decision-making team has reached an agreed interest rate decision. At the last two meetings, two members opposed staying on hold and advocated interest rate hikes. According to the data, overnight index swaps currently show that the probability of interest rate hikes this week is over 90%, which is about double the probability predicted by the market at the end of October. The relevant contract also fully takes into account the possibility of another rate hike before the end of October 2026.

The market generally expects Bank of Japan Governor Ueda Kazuo to raise the benchmark interest rate to the highest level in 30 years on Friday. As the government's demand for cheap financing clashes with the depreciation of the yen driving up import prices, the future policy path is becoming more and more confusing. The new prime minister, Sanae Takaichi, who criticized interest rate hikes last year, is now facing pressure from rising living costs, which has weakened her ruling party's approval rating. Since taking office in October, Japan's first female prime minister has never criticized Kazuo Ueda's plan to reduce monetary easing, and fighting inflation has been made a priority for her. Outsiders generally expect the Bank of Japan Policy Committee to raise the benchmark interest rate by 0.25 percentage points to 0.75% at the end of the two-day meeting on Friday. This is the first time during Ueda and Kazuo's tenure that 50 economists interviewed unanimously anticipated interest rate action. This may also be the first time since July that the central bank's nine-member decision-making team has reached an agreed interest rate decision. At the last two meetings, two members opposed staying on hold and advocated interest rate hikes. According to the data, overnight index swaps currently show that the probability of interest rate hikes this week is over 90%, which is about double the probability predicted by the market at the end of October. The relevant contract also fully takes into account the possibility of another rate hike before the end of October 2026.