Maxco Futures — The Bank of Japan (BOJ) may take a significant step in its upcoming policy meeting. In his speech today, Monday, December 1, 2025, Governor Kazuo Ueda delivered his strongest indication yet that the central bank is seriously considering a rate hike — a shift that could mark the end of Japan’s long-standing era of ultra-loose monetary policy.
A New Tone: The “Pros & Cons” of Raising Rates
- Ueda stated that the BOJ will carefully evaluate the “advantages and disadvantages” of a potential rate hike at the upcoming December 18–19 meeting.
- Key factors supporting the possibility include:
• a tightening labor market,
• consistently strong corporate profits, and
• companies becoming more proactive in setting wages — suggesting that domestic economic momentum is supportive of policy tightening. - At the same time, Ueda emphasized that no final decision has been made — the BOJ is still waiting for additional data, particularly wage developments and global economic conditions such as U.S. economic indicators.
Ueda described the potential rate hike as “lifting the foot off the gas,” rather than “slamming on the brakes” — indicating that any tightening would be a moderate adjustment rather than a drag on growth.
Market Reaction: Yen Strengthens, Bond Yields Rise
Following Ueda’s speech:
- The yen strengthened by approximately 0.4% against the U.S. dollar, reaching around ¥155.49 per dollar — reflecting higher market expectations of a rate hike.
- Japan’s 10-year government bond yield climbed to around 1.84% — the highest level since 2008.
Markets quickly adjusted their valuations in response to the rising probability of a BOJ rate hike, bringing Japan’s bond and FX markets back into the spotlight for global investors.
Key Factors: Wages, Inflation, and the Yen
Despite the increasingly hawkish tone, the BOJ continues to signal caution:
- Wage growth — including bonuses and base salaries — remains the most crucial component. Without strong wage momentum, the argument for a hike weakens.
- Yen depreciation remains a major imported-inflation risk: a weaker yen raises import costs and intensifies domestic price pressures. The BOJ has called this a “major risk to underlying inflation.”
- External factors — such as global economic trends and foreign monetary policies (e.g., the U.S. Federal Reserve) — also remain influential. If the external environment deteriorates, the BOJ could delay its move.
In short: the probability of a rate hike is real, but flexibility remains — the final decision will depend on data received ahead of the December meeting.
Global Implications & Investor Outlook
- Currency / FX: The yen may continue to strengthen if the BOJ proceeds with a hike, putting downward pressure on USD/JPY and influencing capital flows in Asia.
- Bonds & fixed income: Rising JGB yields may attract renewed interest from global investors, potentially triggering capital repatriation into Japanese bonds.
- Japanese assets & equities: The banking/financial sector may benefit, while rate-sensitive sectors (consumption, real estate) could face pressure if credit conditions tighten.
- Global market sentiment: A policy shift by the BOJ could reshape global capital flow dynamics, especially given Japan’s role as a “safe-haven” market.
Ueda’s speech today — more hawkish than previous remarks — signals that the BOJ is on the brink of taking real action. However, with the central bank still emphasizing wage and inflation data while assessing global conditions, the final decision remains uncertain. Investors should stay cautious: a rate hike is highly plausible, but monitoring upcoming economic data remains essential before taking aggressive positions.
USD/JPY Technical Outlook
USD/JPY is trading at 155.46 following Ueda’s remarks. Technically, the JPY still has room for further strengthening against the USD, with downside targets near 153.30 and 152.75.
Meanwhile, the nearest resistance — serving as a cap for upward movement — is located at 158.80.
Ade Yunus, ST WPA
Global Market Strategies