The probability of the Bank of Japan raising interest rates in December has risen to over 60%, making monetary policy tightening almost a certainty.

On December 2, according to PolyBeats monitoring, the prediction market “Will the Bank of Japan make an interest rate decision in December 2025?” saw a drastic shift in the probabilities of the “25 basis point rate hike” and “no change” order books, which were initially close to balance: the probability of a rate hike soared from 50% to 85%, while the probability of “no change” plummeted from 50% to 14%. The direct driver of this market upheaval was the speech delivered by Bank of Japan Governor Kazuo Ueda in Nagoya on December 1. Ueda's remarks sent the clearest hawkish signal yet, shifting from a previously cautious stance to a proactive normalization of policy. He clearly stated that the Bank of Japan will “weigh the pros and cons of raising the policy interest rate and make a decision as appropriate” during its meeting on December 18-19. He also emphasized that the weakness of the yen is a trend that “may push inflation higher than in the past,” clearly indicating that the central bank is ready to take action in response to inflation and exchange rate pressures. This stands in stark contrast to Ueda's remarks in October 2025, where he emphasized the uncertainties of the external economy, particularly the potential drag on Japanese wage growth and corporate earnings from U.S. trade policies and tariff risks. This risk-averse attitude led the prediction market to generally hold a cautious outlook on rate hike expectations during November. However, Ueda's recent speech shifted the policy focus from “external risks” to the importance of “internal inflation and exchange rate pressures,” quickly prompting traders to view a 25 basis point rate hike in December as the baseline scenario.