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31/07/24
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JPY Soars After BoJ Hikes Rates
On Wednesday, the Japanese yen was still sparkling, and USD/JPY traded at about 150.27, down 1.62% for the day in the European session. The yen earlier strengthened to 150.04, the highest level versus the dollar since March 19.
At today’s meeting, the Bank of Japan struck an aggressive tone rarely seen. The BoJ increased the benchmark rate to about 0.25%, up from the previous range of 0%-0.25%, a level last seen in 2008.
The move was seen as aggressive, as the markets were not sure whether the central bank would hike rates or continue holding.
The BoJ soothed the hike by saying in the rate statement that it expected real interest rates to stay “significantly negative” and that it would continue with its accommodative policy to bolster the economy.
This was however the 2nd rate hike since March and shows that the BoJ is serious about keeping inflation in check and tightening policy.
Overshadowed by the unexpected rate hike, the BoJ said it would reduce its Japanese government bond buying in half by Q1 of 2026. Although this move will barely dent the Bank’s bond holdings, it does however indicate a change in policy and the intention to decrease its huge monetary stimulus.
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