In early December, Bank of Japan Governor Kazuo Ueda suddenly broke with convention by revealing ahead of time that the issue of raising interest rates would be discussed at the December 18-19 meeting. As soon as this news came out, market expectations exploded—the probability of a rate hike jumped from the previous 50% to over 85%. Why is the Bank of Japan in such a rush? The reasoning behind it is actually quite complicated.

First, the most direct pressure: inflation. Japan’s inflation rate has exceeded the 2% target for more than three years, and the sharp depreciation of the yen is bringing increasing imported inflationary pressures. Ordinary people are really struggling, and surging prices have become a social issue.

But more crucially, it’s a matter of timing. Uncertainty in the US economy is declining, and the Federal Reserve has started to cut rates. Some analysts believe that the Bank of Japan is hiking rates now to rebuild its policy credibility before the Fed fully pivots. Frankly, this is the last window of opportunity—if they miss it, they may lose the chance to exit ultra-loose policy altogether.

There’s another factor that can’t be ignored: political pressure. In October, the Bank of Japan didn’t raise rates, partly because it conflicted with new Prime Minister Sanae Takaichi’s proactive fiscal policy. As a result, the government’s aggressive moves threw the markets into turmoil—stocks, bonds, and the yen all plummeted. This time, the central bank is speaking up early, in a way seizing back control of monetary policy and stabilizing market confidence.

Additionally, rising wages are providing some support for a rate hike. Although the original text was cut off at this point, this factor is indeed one of the important indicators considered by the Bank of Japan. In short, the anticipation of a rate hike this time reflects the Bank of Japan’s difficult decision-making under multiple pressures.