The Bank of Japan raised interest rates to 0.25% today, in line with our forecast but against market consensus and valuation. The BoJ also announced that bond purchases will be cut by almost half to around JPY 3 trillion by the first quarter of 2026, notes Francesco Pesole, FX analyst at ING.
JPY is not recovering for some reason
“The statement also highlighted inflationary risks from higher import prices, where the impact of a weak currency is greater. This surprise rise is part of a broader effort to stabilise the yen, in our view. USD/JPY seesawed following the announcement, with an attempted downside breakout stalling around 151.6 (200-day moving average support). The pair quickly rebounded and is currently trading at 153.0, slightly above pre-announcement levels.
“The lack of a JPY recovery following the announcement must be associated with some lingering structural positioning in the yen, as speculators might have seen the rate hike as a short-term spike for the yen, and as an opportunity to re-enter attractive carry trades below 152. Incidentally, the consensus was likely in favor of a further tapering of bond purchases, which have a greater influence on how much JGB yields can rise.
“Beyond the near term, the JPY appears to be on a more solid footing, although watch out for some JPY selling later today once the Ministry of Finance releases FX intervention figures – an elevated figure could spark speculation that the intervention strategy is unsustainable. Events in the US should determine the direction of USD/JPY in the near term, and we believe a retest of sub-152 levels remains possible.”
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
