Japan may deliver its first interest rate hike in 11 months as policymakers assess persistent inflation and improving wage dynamics. Recent data shows price pressures remaining above the central bank’s target, while annual wage negotiations point to continued pay growth across major industries.
Officials have signaled that financial conditions remain accommodative but increasingly misaligned with domestic economic momentum. A rate increase would mark another step away from Japan’s long-standing ultra-loose monetary stance, which has kept borrowing costs near zero for years to support growth.
Markets are closely watching the decision for its potential impact on the yen, bond yields, and global capital flows. A shift in Japan’s policy could tighten domestic liquidity and influence international investors who have relied on low Japanese rates to fund carry trades.