The Nikkei 225 Index jumped by over 1.1% today, Dec. 19, even after the Bank of Japan (BoJ) hiked interest rates to the highest point since 1995. The index, which tracks the biggest Japanese companies, rose to ¥49,568, much higher than this week’s low of ¥48,900.
BoJ hikes rates to 0.75% and hints of more to come
The Nikkei 225 and the Topix indices jumped after the BoJ hiked interest rates by 0.25% to 0.75%, its highest level since 1995. This rate hike, which was the first one in eleven months, came shortly after the statistics agency published the latest inflation report.
The report showed that the headline consumer interest rates dropped to 2.9% in November from 3.0% in December. Core inflation, which excludes volatile food and energy prices, dropped to 3.0% from the previous 3.1%.
In a statement, the bank hinted that it may deliver more hikes in the future as it works towards achieving its goal of stable inflation. It said:
“If the outlook presented in the October 2025 Outlook Report will be realized, the Bank will continue to raise the policy interest rate and adjust the degree of monetary accommodation.”
The Japanese yen slipped against the US dollar, while Japanese bond yields continued their uptrend. Data shows that the ten-year yield rose to 1.97% from the year-to-date low of 0.585%.
The BoJ rate hike came a few days after it was reported that it will start selling exchange-traded funds (ETF) worth ¥500 billion starting in January this year.
Therefore, the Nikkei 225 and Topix indices rose because the interest rate decision was fully priced in. The hike was in line with what most analysts were expecting. A Polymarket poll showed that the odds of a hike stood at 99% before the rate decision.
Most Japanese stocks rallied
Most Nikkei 225 Index companies rose after the latest BoJ rate hike. Softbank’s stock price jumped by 6%, mirroring the performance of the other companies in the AI industry.
The other top gainers in the index were companies like Mazda Motor, Fujikura, Kajima, Taisei, Resonac, and Mercari.
Japanese banks were also some of the top beneficiaries of the rate hike as they will lead to higher net interest margin. Credit Saison stock rose by 2.70%, while Shizuoka, Sumitomo Mitsui, Concordia, Chiba Bank, Fukuoka, Mizuho, and Mitsui UFJ jumped by over 1.5%.
Nikkei 225 Index technical analysis
Nikkei Index chart | Source: TradingView
The daily chart shows that the Nikkei 225 Index held steady after the latest BoJ interest rate decision. It was trading at ¥49,645, higher than its lowest level this week.
The index has remained above the 50-day and 100-day Exponential Moving Averages. Most importantly, it has formed the highly popular continuation pattern known as a bullish pennant.
Therefore, the index will likely have a strong bullish breakout, with the initial target being the year-to-date high of ¥52,590, its highest point on November 4. A move above that level will point to more gains, potentially to ¥53,000.
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