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By Megumi Fujikawa

  The Bank of Japan will thoroughly discuss the possibility of an interest-rate increase at its upcoming meeting, Gov. Kazuo Ueda said, stoking hopes that it could resume monetary tightening this year. 

  The central bank will pay special attention to the outlook for wage increases, he said in a speech to business leaders Monday in Nagoya, central Japan. 

  Sticky inflation backs the case for higher rates, but as living costs rise policymakers want to see commensurate growth in wages. 

  Ueda said the bank is actively collecting information regarding firms' stance toward pay increases ahead of its next policy-setting meeting scheduled for Dec. 18-19. 

  At that meeting--the final one of the year--the BOJ "will consider the pros and cons of raising the policy interest rate and make decisions as appropriate," Ueda said. 

  While policymakers at the central bank have signaled that a rate hike is likely in the near future, market participants and economists have been divided on when it will happen. 

  Persistent inflation suggests that conditions are becoming ripe for the central bank to make a move, but some economists say Prime Minister Sanae Takaichi's preference for expansive economic policies complicates the path to monetary tightening. 

  This tension, combined with lingering uncertainty over the full impact of U.S. tariffs and the need for inflation expectations to become firmly anchored, has split views on when the BOJ will act next. 

  But after Ueda's remarks on Monday, markets seem to be leaning toward a December hike. The yen recovered against the dollar, reaching around 155.50 in morning trade after weakening to near 157.90 recently. The 10-year Japanese government bond yield rose to 1.850%, the highest since June 2008. 

  In response to the speech, Capital Economics changed its call for a January rate hike, now expecting the BOJ to lift its policy rate to 0.75% in December. 

  "If the bank does indeed raise its policy rate in a couple of weeks, we'd still expect two more rate hikes in 2026," it said in a note. 

  Ueda said raising rates at an appropriate speed won't put the brakes on Japan's economy--rather, it would take the foot off the accelerator enough to achieve growth and price stability. 

  Gradually adjusting interest rates "will ultimately lead to the success of the efforts undertaken by the government and the bank thus far," he said. 

  Write to Megumi Fujikawa at megumi.fujikawa@wsj.com 

  (END) Dow Jones Newswires

  November 30, 2025 21:20 ET (02:20 GMT)
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