First increase above 0.5% in 30 years as bond yields surge past 2%
Tokyo, Dec. 19, 2025 – The Bank of Japan decided on the 19th at the Monetary Policy Meeting to raise the benchmark interest rate from 0.5% annually to 0.75% annually, an increase of 0.25 percentage points.
This marks the first time in 30 years that Japan’s benchmark interest rate has exceeded 0.5% annually.
The Bank of Japan ended its negative interest rate policy in March of last year.
In July of last year, it raised the benchmark interest rate to 0.25% annually, and in January of this year, it raised it to 0.5% annually.
After that, it kept the benchmark interest rate unchanged for six consecutive times until October.
The Bank of Japan has set the neutral interest rate at 1–2.5% annually.
Even with this rate hike, since the benchmark interest rate remains below the lower end of the neutral rate (1% annually), there are observations that the possibility of an additional 0.25 percentage point increase next year is high.
As concerns grow that interest rates will rise further, the yield on Japan’s 10-year government bonds—a benchmark for long-term interest rates—surpassed the psychological resistance level of 2% annually, reaching its highest level in 19 years and several months since May 2006. (The Chosun)
