Archive · 26 Dec 2025
Japan's Bond Market Reacts to Inflation Data
Tokyo's inflation rate went down more than expected, which is good news.
But the Bank of Japan (BoJ) is still likely to keep raising interest rates because inflation is still above their target.
The BoJ recently raised rates to the highest level in 30 years, and this has made the stock market go up.
The government also approved a big budget for next year, which has helped calm worries about too much debt.
Investors are watching closely to see what happens next with the economy.
Tokyo's inflation eased more than expected, with consumer prices excluding fresh food rising 2.3% in December, down from 2.8% in November.
The Bank of Japan (BoJ) raised its policy rate to 0.75%, the highest since 1995, and hinted at further rate hikes despite the cooling inflation.
Japan's Topix gauge and Nikkei 225 index reached record highs as concerns about debt eased and the stock market reacted positively to the BoJ's actions.
The government approved a record budget for the next fiscal year, aiming to balance fiscal policy and debt management.
Benchmark Japanese government bonds gained slightly as expectations for restrained debt issuance helped yields retreat from a 26-year peak.
- Who
- Bank of Japan (BoJ), Tokyo Metropolitan Region, Investors
- What
- Tokyo inflation data, BoJ rate hikes, bond market reaction
- When
- December 2025, with ongoing effects into 2026
- Where
- Japan, primarily Tokyo
- Why
- To assess inflation trends, BoJ's monetary policy, and market sentiment
- Tokyo CPI (Excluding Fresh Food)
- 2.3% in December (down from 2.8% in November)
- Tokyo Core CPI (Excluding Energy)
- 2.6%
- Total Inflation Gauge
- 2.0% (down from 2.7% in the prior year)
- BoJ Policy Rate
- 0.75% (highest since 1995)
- Nikkei 225 Performance
- Up 0.94% (475.86 points) at 50,883.65
- Topix Gauge
- Record high of 3,436.75
- Fiscal 2026 Budget
- Record budget approved
- JGB Yields
- Retreated from 26-year peak
Sources
Japan awaits two-year bond auction amid growing rate hike fears
Japan PM sets record ¥122.3 trillion budget for FY2026. Here’s how the spending will play out
Tokyo inflation eases better than estimated; BoJ likely continue with interest rate hikes
Japans Topix gauge touches record high on easing debt concerns
