The Bank of Japan (BOJ) is continuing its normalization process following its long-standing ultra-loose monetary policy. At its two-day monetary policy meeting ending on December 19, 2025, the bank is strongly expected to raise its short-term policy rate from 0.50% to 0.75%. If this step is taken, interest rates in Japan will reach their highest level in nearly 30 years. The bank, which implemented gradual interest rate increases throughout 2025, had set the rate at 0.50% in October 2025. The BOJ began its normalization process in 2024 by ending its negative interest rate policy. According to November 2025 data, core consumer inflation remained stable at 3%, while overall CPI was 2.9%, well above the BOJ's 2% target. While a statement is expected in the afternoon Japan time, BOJ Governor Kazuo Ueda is expected to hint at future increases in his press conference, but not give a clear commitment on the timing. Market expectations also support the increase: according to a Reuters survey, 90% of economists predict a 25 basis point increase in December. According to interest rate futures, the probability of an increase is in the 90-95% range. Furthermore, the business confidence index has reached a four-year high, and wage increases continue. While Asian stock markets showed gains before the decision, volatility in global markets may increase. Although negative real interest rates may persist, the signal of normalization will strengthen.