Clear Signal from Bank of Japan to Raise Interest Rates in December Begins to Emerge

The currency and bond markets are increasingly confident that the Bank of Japan will raise interest rates in December 2024. Recent data shows that investors have priced in an 80% probability of this decision occurring at the policy meeting on December 18-19.

**What Are the Official Japanese Authorities Indicating?**

According to reports from several Japanese government officials, the central institution is preparing to raise its policy interest rate from the current 0.5% to 0.75%. Governor Kazuo Ueda emphasized in his statement on Monday that the bank will evaluate the "benefits and drawbacks" of the rate hike this month, a clear signal to the market that momentum is already in place.

One government representative shared an interesting perspective: "This decision is entirely within the domain of the Bank of Japan. The government gives them the freedom to determine their own course." The statement also hints that the certainty level for a rate hike in December is very high.

**First Step of the Year**

If this decision materializes, it will be the first time the Bank of Japan has raised interest rates since January 2024. This policy shift is considered by some analysts as a move that the government will accept, although political dynamics remain a factor of concern.

**Challenges from Government Policy Orientation**

Prime Minister Sanae Takaichi is known to have a dovish stance towards tight monetary policy. This creates some uncertainty about how the government will respond if the Bank of Japan indeed raises interest rates by 0.25 percentage points. The main question in the market is no longer whether the hike will happen, but to what extent the final interest rate level will be revised in the future — a topic that has yet to be fully clarified by Ueda's statements so far.