The Bank of Japan may raise interest rates for the first time this Friday, with market probability expectations rising to 95%.

【BlockBeats】The Bank of Japan Governor Kazuo Ueda’s Policy Committee is expected to announce a 25 basis point increase in the overnight lending rate to 0.75% at this Friday’s meeting. This will be the first rate hike since January of this year, and the benchmark interest rate will also rise to its highest level since 1995.

According to the latest Overnight Index Swap (OIS) data, traders’ probability of this rate hike has reached 95%, nearly doubling since early last month. Supporting this optimistic outlook are recent robust Japanese wage growth and concerns that the US tariff impact is lower than previously feared. In the previous two meetings, there were also voices within the policy committee supporting a rate hike.

It is worth noting that market focus has shifted from whether the rate hike will occur to the central bank’s stance on the future interest rate path. Sources familiar with the matter revealed that even if the rate rises to 0.75%, central bank officials generally believe this still has not reached the so-called “neutral interest rate” level, with some officials even advocating that a 1% rate is still too low. If the central bank signals a more hawkish stance, the short-term could stabilize the yen exchange rate, but it would also push up bond yields, increasing pressure on Japan’s government budget planning for the next fiscal year.

The policy statement is expected to be released around noon local time, and Kazuo Ueda will hold a press conference at 15:30 in the afternoon. His remarks will become a key window for market interpretation of future policy directions.