The Bank of Japan is expected to raise its base rate at the policy‑rate decision meeting scheduled for the 17th–18th. The financial market already carries a mood that an additional increase has become realistic, which heightens the concern about the collapse of JPY carry trades. Yet the market judges that such a drastic collapse would be limited and thus the expectation for future monetary policies in China and Japan is rising.
Market analysts rate the probability that the Bank of Japan will add 0.25 percentage points at this meeting at 94% as of January, compared with June when it raised rates from 0.75% to 1.0%. If a second increase occurs this year, a tightening policy after December is expected, and recent media reports have suggested that the Bank could raise its policy rate up to 1.25%.
The Japanese economy is analyzing how such an interest‑rate hike will affect price inflation and consumer credit. Market participants watch whether this decision might trigger changes in JPY value and global trade markets. While the Bank’s policy direction is interpreted as a measure to revive domestic growth, it must also consider the interaction with global economic conditions.