Bank of Japan Hikes Rates to 1.25% in Split Vote, Japanese Yen Weakens
| Pair | Now | Since publish |
|---|---|---|
| USDJPY | — | — |
- BoJ hikes to 1.25% (highest in 31 years); JPY weakens.
- Dovish hike: Ueda‘s cautious guidance disappoints, JPY down 1.2%.
- USD/JPY surges past 156.95 on BoJ‘s dovish rate decision.
- Dollar Index briefly hits multi-month high after BoJ move.
The Bank of Japan (BoJ) raised its policy rate by 25 basis points (bps) to 1.25%, marking the highest level in 31 years. This move was largely anticipated by financial markets, with near 100% probability priced in. However, the Japanese Yen (JPY) significantly weakened against the US Dollar (USD), with the USD/JPY pair advancing sharply to trade around 156.95 and reaching an intraday high of 158.06. The JPY’s decline is attributed to the decision being a 7-2 split vote, with board members Toichiro Asada and Ayano Sato dissenting, which introduced a dovish tone to the central bank’s message. Analysts suggest the “sell the fact” reaction was also influenced by cautious guidance from Governor Kazuo Ueda and doubts about the pace of future tightening, despite persistent core inflation risks.
The Bank of Japan’s rate hike was perceived as dovish, with Governor Ueda providing cautious guidance and pushing back against expectations for consecutive hikes, which disappointed market participants. Following the hike, the Japanese Yen is down 1.2% against the US Dollar. Concurrently, the Dollar Index briefly touched its highest level since late July before pulling back, now trading just above 100.30.