The Bank of Japan raised its policy rate target to its highest level in 30 years on Friday, another small step back from the world’s longest and biggest experiment with ultra-expansionary monetary policy. If the central bankers in Tokyo continue to slowly raise interest rates, the impact could be felt far and wide—including in the U.S. As Japan tightens, central banks elsewhere are making other moves. Russia’s central bank on Friday lowered its key interest rate for a fifth straight meeting, but said it will continue to keep borrowing costs at a level that restrains activity. And on Thursday, the European Central Bank held its benchmark interest rate, where it has been since June, while the Bank of Mexico lowered its policy interest rate in a 12th consecutive cut. On the data front, inflation in the U.S. eased unexpectedly in November, but economists cautioned against reading too much into the report because of gaps in data collection during the long government shutdown.

The Bank of Japan’s rate-setting panel agreed to lift the target rate to 0.75% from 0.5% previously, where it had been held since January. BOJ officials raised their policy rate target in response to sticky inflation, which is still a painful novelty for households in a country that was battling flat or falling prices for decades.

U.S. investors in stocks, bonds, cryptocurrencies and other assets tend not to pay too much attention to the policy moves of other countries’ central banks. But the BOJ is different. One reason is that ultralow interest rates in Japan have long made the yen an attractive currency for hedge funds and other sophisticated investors to borrow to finance purchases of higher-yielding assets, including Treasurys or U.S. stocks.

European Central Bank policymakers opted to hold the deposit rate at 2%, where it has been since June. ECB President Christine Lagarde said Thursday that the ECB is in a “good place,” repeating a phrase she has used often in recent months. Inflation has fallen back toward the central bank’s 2% target and is expected to be under that level next year and in 2027 before returning to around that mark the following year.

Economists on Thursday warned that a big drop in November inflation had more to do with data challenges caused by the government shutdown than with actual changes in the economy. Unfortunately, those data problems might be around for months to come.

The Labor Department issued its report on November prices after the long shutdown, when its workers weren’t able to gather data that they normally would have. Many economists think, as a result, that Thursday’s report underestimated the change in consumer prices—and that future reports could be affected too. There was no October report on the consumer-price index.

• Inflation Eased to 2.7% in Report Distorted by Government Shutdown
• Beef Prices Set New Record, Driving Food Inflation Higher

President Trump is clearly frustrated by all the talk of an “affordability crisis.” I don’t blame him. As Thursday’s admittedly distorted consumer-price index report showed, inflation simply isn’t behaving badly. But don’t define affordability too narrowly. It means not just the prices we pay, but the means to pay them. We may be focusing too much on the first and not enough on the second, writes WSJ's Greg Ip.

• U.K. consumer sentiment picked up in December, with households feeling less pessimistic after the government provided clarity over its fiscal policy outlook in the fall budget. Consumer confidence rose two points to minus 17, according to research group GfK's index, published with the Nuremberg Institute for Market Decisions on Friday. The result of the survey, which gauged sentiment of around 2,000 consumers, surpassed a consensus of economists polled by WSJ, which expected a less-pronounced rise to minus 18. (Dow Jones Newswires)

• EU Delays Mercosur Deal Sign-Off to January

The resilience Canada’s economy has shown in the face of trade uncertainty will mean the country’s biggest banks must continue to hold elevated capital buffers, though if the cracks in the banking system widen the industry’s regulator has signaled it is prepared to lower the shield lenders hold against risks.

10 a.m.: Employment Trends Index
10 a.m.: Existing Home Sales
10 a.m.: University of Michigan Survey of Consumers - final

8:30 a.m.: Chicago Fed National Activity Index
10 a.m.: Online Help Wanted Index

The Bank of Japan's decision to raise interest rates was unsurprising, though its hawkish messaging suggest there is further tightening ahead, Capital Economics says in a note. The BOJ indicated a greater confidence in the Japanese economy's ability to weather tariff uncertainties, and for corporate profits expected to remain elevated, says economist Abhijit Surya. He expects incoming data on economic activity and inflation to more likely surprise on the upside relative to the BOJ's forecasts. Capital Economics says its confidence is growing in an above-consensus terminal rate forecast of 1.75% in 2027. — Jason Chau

Seasonal cooling is finally seeping into the housing market after an unseasonably active fall, according to Zillow. Price cuts from sellers dropped back to normal levels from near-record highs; a rare instance of buyers losing a bit of leverage in a year when many housing trends moved in their favor. Affordability is still a hurdle for home buyers, Zillow says, but 2025 brought real progress. Mortgage payments dropped by more than $100 a month, while incomes continued to rise. For many households, that small shift can be the difference between sitting out the market and finally being able to buy or sell a home. Low mortgage rates in September and October pushed buyers and sellers to be more active than usual. But November saw a return to seasonality, despite mortgage rates that ticked down to 2025 lows. Homeowners without a need to sell are likely deciding to wait out the winter. — Chris Wack

WSJ Pro Central Banking brings you central banking news, analysis and insights from WSJ’s global team of reporters and editors. This newsletter was compiled by markets reporter Vicky Ge Huang in New York. Send your tips, suggestions and feedback to vicky.huang@wsj.com.