The Bank of Japan moved to slow inflation as the prime minister is borrowing more to fund an ambitious effort to build up industry and support households.
Published Dec. 18, 2025Updated Dec. 19, 2025, 3:24 a.m. ET
Speaking this month at an international finance conference in Tokyo, Prime Minister Sanae Takaichi of Japan used an unusual turn of phrase to sell the assembled crowd on her plan to revive the economy.
“Just shut your mouths and invest everything in me,” Ms. Takaichi declared, quoting a line from the popular manga series “Attack on Titan” — a reference that several in the room admitted was lost on them. “Japan is back. Invest in Japan,” she continued.
Ms. Takaichi’s promise to the group was that she would bolster Japan’s economy through government spending, but only in a way that was “sustainable” and “responsible.” The spending would be enough to drum up growth but keep Japan’s already enormous debt levels manageable, she said.
The prime minister’s ability to balance these dual pledges is about to be put to the test.
On Friday, the Bank of Japan increased its benchmark interest rate to 0.75 percent. While this remains far below rates in other major economies, it is the highest level in Japan — which for decades has used near-zero rates to battle deflation — since 1995.
Kazuo Ueda, the governor of the Bank of Japan, said at a news conference on Friday that the central bank would be open to more rate increases, depending on the performance of the economy and path of prices.
The central bank’s decision to raise rates means the cost of servicing Japan’s public debt, the highest in the developed world, will become higher. Ms. Takaichi’s government just pushed through a $117 billion stimulus package, which includes items like subsidies for households, more money for Japan’s military, and investments in the semiconductor and shipbuilding industries.
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