Dec. 1, 2025 – Nagoya, Japan – The Bank of Japan may raise interest rates later this month, Governor Kazuo Ueda said Monday, signaling the strongest indication yet that a hike could be imminent.

Ueda noted that the BOJ will weigh the "pros and cons" of raising rates at its Dec. 18-19 policy meeting, amid improving economic conditions and declining uncertainties from U.S. tariffs. Labour shortages are intensifying, corporate profits remain strong, and wage-setting behaviour is under close scrutiny, he added.

Following the remarks, the yen strengthened, with USD/JPY down 0.4% to 155.49, while the yield on the 10-year Japanese government bond rose 4 basis points to 1.84%, its highest since June 2008.

Analysts say the comments lay the groundwork for a December hike, though Ueda left room to wait until January depending on U.S. economic data and domestic developments. Another rate increase would still leave real borrowing costs low, amounting to "easing off the accelerator" rather than applying the brakes on growth.

The BOJ exited its decade-long massive stimulus program last year and raised rates to 0.5% in January 2025, aiming for a sustainable 2% inflation target. With inflation remaining high, the board increasingly favors another rate hike.