Preview: Bank of Japan set to raise interest rates today, potential shift in Fed rate cut outlook

BlockBeats News, on December 19, the Bank of Japan will announce its interest rate decision this morning between 10:30 and 12:30 (most commonly around 10:45-11:30). Governor Kazuo Ueda will hold a press conference at 14:30 (UTC+8). The probability of a "25 basis point rate hike in December" in Japan has reached as high as 98%. If the rate hike occurs as expected today, Japan's benchmark interest rate will rise from 0.50% to 0.75%, reaching its highest level since 1995, marking Japan's official farewell to the ultra-low interest rate era that has lasted for 30 years.

Japan's renewed signal of a rate hike has also triggered concerns about "draining liquidity" from the US market, which will affect the Federal Reserve's prospects for rate cuts. Japan is the largest foreign holder of US government debt, holding about $1.2 trillions worth of US Treasury bonds as of September. Wall Street is concerned that rising Japanese bond yields will attract funds away from US investments and lead to an increase in US Treasury yields. The decline in US Treasury yields this year has been a contributing factor for the Federal Reserve to resume rate cuts, lowering mortgage rates and boosting the stock market, which often benefits from lower Treasury yields. However, a renewed rise in US Treasury yields will hinder rate cuts.