Bank of Japan Likely to Raise Interest Rates in December

According to Odaily, three Japanese government sources have indicated that the Bank of Japan is likely to raise interest rates in December, a move the government is expected to tolerate. The central bank appears prepared to increase the policy rate from 0.5% to 0.75%, as signaled by Governor Kazuo Ueda in a speech on Monday. This would mark the first rate hike since January of this year. One source stated, "If the Bank of Japan wants to raise rates this month, they should decide for themselves. This is the government's stance." The source added that a rate hike this month is almost certain. Ueda mentioned on Monday that the central bank would weigh the "pros and cons" of a rate increase this month, suggesting a strong possibility of a hike during the December 18-19 meeting. These remarks have led the market to price in an 80% chance of a December rate hike, although some market participants are watching how the dovish government of Prime Minister Sanae Takaichi might respond. The market's focus may shift to the central bank's language regarding the extent to which rates will eventually be raised, a topic on which Ueda remains ambiguous.