The Bank of Japan's Rate Hike Probability Rises to Over 60% in December, Monetary Policy Tightening Likely

On December 2nd, monitoring data from PolyBeats reveals a sharp shift in the prediction market tied to the Bank of Japan’s (BOJ) December 2025 interest rate decision. Previously balanced probabilities for "25-basis-point rate hike" and "maintain status quo" have flipped dramatically: the hike odds surged from 50% to 85%, while the "maintain status quo" probability plummeted from 50% to 14%. The market move was directly driven by BOJ Governor Haruhiko Kuroda’s December 1st speech in Nagoya, which delivered the clearest hawkish signal to date. Kuroda shifted from his prior cautious stance to an active policy normalization position, explicitly stating the BOJ will "weigh the benefits and drawbacks of raising the policy rate and make an appropriate decision" at its December 18th–19th meeting. He also emphasized the yen’s weakening trend "may push inflation higher than in the past," clearly signaling the central bank is ready to act amid inflation and exchange rate pressures. This contrasts sharply with Kuroda’s October 2025 remarks, where he highlighted external economic uncertainty—especially how U.S. trade policies and tariff risks could weigh on Japanese wage growth and corporate profits. That risk-averse tone kept rate hike expectations cautious in the prediction market throughout November. Now, Kuroda’s latest speech has shifted the policy focus from "external risks" to "internal inflation and exchange rate pressures," quickly leading traders to view a 25bp December rate hike as the base case.