The Bank of Japan is signalling more clearly that a near-term rate hike is back on the table, with officials reviving hawkish language as the yen weakens and political resistance to tightening fades. Sources familiar with the bank’s thinking told Reuters that the BOJ has intentionally shifted messaging in recent days to highlight the inflationary risks of a persistently weak yen, reinforcing that a December hike remains a live option.
The change follows a meeting between Prime Minister Sanae Takaichi and Governor Kazuo Ueda, which appeared to remove immediate political objections to further tightening. While the decision between a December or January move is still finely balanced—and could be swayed by the U.S. Federal Reserve’s decision a week earlier—officials increasingly see the yen’s decline as structural, with more lasting upward pressure on prices.
A growing number of board members have joined the hawkish camp. Junko Koeda said real rates must keep rising, while Kazuyuki Masu described the timing of a hike as “nearing.” Both are now seen as potential supporters of a move to 0.75%, aligning with two earlier dissenters. Even Ueda has shifted tone, saying the board will debate the “feasibility and timing” of a hike in coming meetings—departing from his prior reluctance to guide on timing.
The BOJ has held rates at 0.50% since January, partly out of caution over the U.S. tariff shock. But the economic justification for waiting is shrinking: the impact of tariffs has been limited, early wage-settlement signals are firming, and the yen’s renewed drop has strengthened the case for tightening. Takaichi and Finance Minister Satsuki Katayama have offered no objection to further normalisation, easing political constraints.
Investors remain divided. A Reuters poll shows a slim majority expecting a hike at the December 18–19 meeting, with all surveyed economists projecting a move to 0.75% by March. But the timing could depend on the Fed. A hawkish Fed stance could push the yen weaker and pressure the BOJ into a December move; a Fed cut could ease yen pressures but raise questions about global demand and BOJ sequencing.
For now, analysts say the BOJ’s communication shift is deliberate: a reminder that Japan’s era of ultra-low rates is ending and that policymakers have a “real desire to normalise” despite political noise
