Japan set to raise interest rates to highest level in 30 yrs as inflation holds steady

Tokyo: Japan is preparing to lift interest rates to their highest level in 30 years, after inflation held steady in November, keeping markets on edge ahead of the japan interest rate decision.

Core consumer prices, excluding fresh food, rose 3 percent in November, the same rate as a month earlier, in line with market expectations.

The data comes as investors brace for a potential rate hike that would be the first since January and could deepen volatility in Japan’s bond market. Yields on Japanese government bonds have climbed in recent weeks on concerns over fiscal discipline under Prime Minister Sanae Takaichi, while the yen has weakened.

Takaichi, who took office in October, has vowed to tackle inflation as a top priority. Her government secured parliamentary approval for an extra ¥18.3 trillion ($118 billion) budget to fund a large-scale stimulus package. Although she has long favoured expansionary fiscal and monetary policies, she has stressed that decisions on the interest rate should remain with the Bank of Japan (BoJ).

The Bank of Japan began exiting ultra-loose policy last year but paused further tightening in early 2025 amid global growth risks and concerns over US tariffs. The last hike in January took the japan interest rate to its highest level in 17 years.

Inflation pressures remain broad-based. Rice prices surged 37 percent year-on-year in November, driven by supply disruptions after extreme heat and panic-buying following last year’s earthquake warning, the internal affairs ministry said.

Japan’s economy contracted 0.6 percent in the third quarter, though Governor Kazuo Ueda said recently the impact of US tariffs has so far been limited, with companies absorbing costs rather than passing them on.

Most economists surveyed by Bloomberg expect the upcoming Bank of Japan interest rate decision to deliver a hike from 0.5 percent to 0.75 per cent, a move that would take borrowing costs to levels last seen in the mid-1990s and could ripple across global markets.