Business & Economics
BOJ’s 19-Dec-2025 0.75% Liftoff Ends Japan’s Zero-Rate Era
The Bank of Japan raised its overnight call rate by 25 bp to 0.75 % on 19 Dec 2025, its first move since January and highest setting since 1995, signalling willingness to tighten further as wage-led inflation embeds.
Focusing Facts
- Policy board voted 9-0 to lift the target from 0.50 % to 0.75 %.
- 10-year JGB yield spiked to 2.02 %, a 26-year high, within hours of the decision.
- Core CPI has exceeded the 2 % target for 44 straight months, running at 3.0 % in Nov 2025.
Context
When the BOJ last tried to normalise—August 2000’s 0.25 % hike and July 2006’s move to 0.50 %—recessions quickly forced reversals; those false starts, alongside 2013’s unprecedented QQE, kept Japan the global fountain of free yen. Today’s lift, though still leaving real rates negative, closes the world’s final zero-rate chapter and chips away at a funding model that powered the carry trade and cushioned a public debt near 230 % of GDP. Structurally, it reflects three intertwined shifts: stubborn global inflation after the pandemic, tentative wage gains despite a shrinking labour force, and political tolerance for stronger yen to ease imported-price pain. Over a 100-year lens, this could mark the moment Japan exited its post-bubble deflationary epoch and re-joined the monetary mainstream—or, if growth falters, another entry in its long catalogue of premature tightenings, underscoring how demographic drag and fiscal overhang complicate any return to “normal” interest-rate terrain.
Perspectives
Investor-focused Western financial media
e.g., Morningstar, Investing.com UK — They portray the 0.75 % hike as a watershed that will ripple through global carry trades and funding markets, signalling the BOJ’s growing hawkishness and opening the door to still-higher rates. Because their audience is global investors, they spotlight cross-border capital-flow risks and market opportunities, which can inflate the perceived worldwide impact of a modest quarter-point move.
Asian business press oriented toward regional growth stories
e.g., The Business Times, The News International — They cast the decision as a confident step toward sustained inflation and wage gains, emphasising that Japan is finally escaping decades of deflation and is ready for further ‘normal’ monetary tightening. By highlighting upbeat domestic indicators and BOJ optimism, they nurture a pro-recovery narrative popular with business readers and may gloss over the risk that higher borrowing costs choke growth or hit heavily-indebted sectors.
Outlets stressing policy uncertainty and downside risks
e.g., Devdiscourse, WRAL — They focus on the yen’s immediate slide, board dissent and unclear guidance, arguing the hike injects fresh uncertainty for consumers, markets and future policy timing. Alarm over volatility and disagreement can attract clicks and caution-minded readers, so these pieces may overstate short-term turbulence relative to the broadly anticipated nature of the move.