Policymakers of the Bank of Japan said the real policy interest rate remains the lowest globally and it is desirable to steadily raise the rate to support economy and curb inflationary pressures, the summary of opinions at the monetary policy meeting held on December 18 and 19 showed Monday.
At the meeting, the board unanimously decided to hike the uncollateralized overnight call rate to "around 0.75 percent" from "around 0.5 percent."
The interest rate has reached the highest level since 1995. Previously, the BoJ had lifted the benchmark rate by 25 basis points in January 2025.
Even after the latest rate hike, real interest rates are likely to remain significantly negative, the board noted. The board emphasized the need to monitor the impact of the rate hike on the economy and financial markets.
Members said it is possible that there will be a shift in the overseas environment from this year's tendency toward cutting policy interest rates to a tendency toward raising the rates next year.
"In order to avoid falling behind the curve, it is desirable for the Bank to steadily raise the policy interest rate," members said.
The board said the bank should choose the appropriate timing to adjust the policy rate in future, after examining the state of economic activity, prices, and financial markets.
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