The Bank of Japan signals continued interest rate hikes as the economy bounces back.

The Deputy Governor of the Bank of Japan, Shinichi Uchida, stated that the BOJ will continue to raise interest rates if economic growth and inflation develop as expected. The BOJ raised the basic interest rate to 0.5% in January, ending a more than decade-long ultra-loose monetary policy. This move reflects confidence in the economic bounce back and stable price action trends after many years of deflation.

Analysts predict that the BOJ could increase to 0.75% at the beginning of 2026 if inflation remains around the 2% target and wages continue to rise. Mr. Uchida emphasized that the next steps will be based on a careful assessment of domestic demand, the labor market, and global trade. Although business confidence is improving, uncertainties in international trade and geopolitical risks remain challenges for the monetary policy normalization path.