Updated The Bank of Japan raised its short-term policy rate to 0.75% from 0.5% at its December meeting, citing increased confidence that inflation will remain sustainably near its 2% target and signalling that further tightening could follow if its outlook is realized.
Bitcoin Edges Higher as BoJ Lifts Rates to 0.75%, Signalling Gradual Tightening
19 December 2025 - 09:26 CET
By Giles Broom
Policy decision
The BoJ raised the uncollateralized overnight call rate from 0.5% to around 0.75%, adjusting the degree of monetary accommodation. The central bank said the move reflects greater confidence that price and wage developments are evolving broadly in line with its projections. The decision aligns with expectations that the BoJ was preparing to take another step away from ultra-loose policy.
Investors responded positively to the decision, with Bitcoin advancing about 3% following the announcement. Ether (ETH) jumped about 4% while Solana (SOL) pushed even higher by 12:00 UTC.
Japanese government bond yields moved higher following the decision, with the 30-year yield near 3.4%, close to recent highs. The yen weakened modestly, with USD/JPY rising to near 156.0, suggesting the move was largely anticipated. Crypto markets have remained under pressure, with Bitcoin and Ether still in negative territory for the week, amid weak risk sentiment.
Store prices in Japan
The BoJ said underlying CPI inflation has continued to rise at a moderate pace, with firms increasingly passing higher labour costs on to prices. Policymakers added that the likelihood of inflation remaining broadly consistent with the 2% target in the latter part of the projection period has increased.
Japan’s annual CPI stood at 2.9% in November, down from 3.0% in October, while core inflation held at 3.0%, remaining above the BoJ’s target for the 44th consecutive month, according to the Ministry of Internal Affairs and Communications.
Despite the rate increase, the BoJ said real interest rates remain significantly negative, with inflation still running near 3%. The central bank said financial conditions continue to support borrowing and investment, stressing that further adjustments would be gradual and guided by incoming data on prices and wages.
The BoJ said it will continue to raise the policy rate and adjust monetary accommodation if its outlook for economic activity and prices is realized. Recent data point to a tight labour market, with unemployment at 2.6% in October.
At the same time, weaker household consumption, which fell 3.0% year on year in real terms in October, reinforces the bank’s emphasis on a data-dependent approach rather than a fixed tightening path.
Change in stance
The decision marks a further step away from Japan’s long-standing ultra-loose policy stance. Changes in BoJ policy are closely watched for potential implications for global liquidity conditions and capital flows, given Japan’s role as a key funding market.
Attention now turns to Friday afternoon's Michigan surveys of consumer confidence and inflation expectations in the US, where the economy is in a different state. On that side of the Pacific, inflation is at a similar level, but unemployment is higher and investors have typically been rewarding a rate cut rather than a hike.
