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Bank of Japan Governor Kazuo Ueda used his first public appearance of 2026 to send an unmistakable message: the central bank’s rate-hiking cycle is far from over. The comments came roughly two weeks after the BOJ raised its benchmark rate to 0.75% on December 19—the highest level since 1995. That decision, however, was overshadowed by Ueda’s vague guidance on future hikes, which disappointed markets and sent the yen tumbling to record lows against the euro and Swiss franc. His New Year remarks appear designed to correct that messaging. Sponsored Bond Markets React “We will keep raising rates in line with improvement in the economy and inflation,” Ueda said Monday at a New Year’s conference hosted by the Japanese Bankers Association. “The appropriate adjustment of monetary easing will lead to the achievement of stable inflation target and longer-term economic growth.” Shortly before Ueda’s speech, Japan’s benchmark 10-year bond yield continued its ascent, reaching its highest level since 1999. The move reflects growing market conviction that further rate increases are on the way. Source: TradingView.com Most BOJ watchers expect the next hike around mid-2026, though some analysts warn it could come sooner if yen weakness persists. The currency was trading around 157.15 per dollar at midday in Tokyo—uncomfortably close to the 160 threshold that market participants believe could trigger government intervention. Last summer, Japanese authorities sold approximately $100 billion to defend the currency at similar levels. Vice Finance Minister Atsushi Mimura warned last month that officials are prepared to take “appropriate action” against excessive currency moves. Sponsored Structural Risks Lurking The BOJ itself acknowledged in late December that “Japan’s real policy interest rate is by far at the lowest level globally.” Despite rising to 0.75%, inflation running at 2.9% keeps the real rate profoundly negative at roughly -2.15%. The central bank noted…

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Filed under: News - @ January 5, 2026 6:16 am