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2025-12-17 10:54:06
[The continued weakness of the yen is becoming a key catalyst for the Bank of Japan and the government to support an interest rate hike at their December meeting] 1. Economist Alicia Garcia Herrero points out that the continued weakness of the yen is becoming a key catalyst for the Bank of Japan and the government to support an interest rate hike at their December meeting. Despite facing US tariffs and geopolitical risks, the resilience of the Japanese economy and inflation expectations that are generally higher than the central bank's 2% target provide support for further policy normalization. 2. The yen's continued low exchange rate against the US dollar, hovering around 155, may exacerbate imported inflation pressures, prompting the central bank to take action. She expects the Bank of Japan to raise interest rates by 25 basis points at its December 19 meeting, raising the policy rate to 0.75%. 3. Looking ahead, if the yen fails to stabilize effectively after the rate hike and continues to erode real income, the Japanese government may accept further tightening, which could create conditions for another 25 basis point rate hike early next year.
