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Japanese Yen Weakens Despite BoJ Rate Hike
Confirmed
In Short: The Japanese yen weakened despite the Bank of Japan raising interest rates, as investors focused on future policy signals.
The Japanese yen weakened significantly despite the Bank of Japan (BoJ) raising interest rates to 1.25%, signaling an acceleration in the pace of rate hikes. The move, expected in September, follows a rate hike in June as the central bank seeks to address rising prices amid higher crude oil prices and a weak yen.
Despite the rate hike being largely priced in, investors are primarily focusing on signals regarding the future path of monetary policy. Governor Ueda’s comments that a 25-basis-point hike “is not necessarily set in stone” and that back-to-back rate hikes could be a possibility have tempered expectations.
The US dollar remains firm, with traders pricing in about a 60% chance of an interest rate hike at the US central bank’s policy meeting, according to the CME FedWatch Tool. US Treasury Secretary Scott Bessent had also called for further interest rate hikes and support for the yen during recent meetings with Japan’s finance minister and the BoJ governor.
The yen’s negative reaction may appear counterintuitive following another monetary policy tightening. However, the two surprise dissents against the rate hike have weighed on the yen, extending its losses.
The Japanese yen surged to a one-month high against the US dollar, with the dollar falling as much as 1.5% to around ¥156.17. The speed of the move raised questions about official intervention, though no confirmation was provided.
The yen had gained 1.6% against the dollar earlier in September as traders anticipated a faster tightening cycle and signs emerged that Japanese investors were beginning to repatriate funds.
Global stocks and bonds slipped on Friday as investors assessed a week of increasingly hawkish central-bank policy, while the Japanese yen weakened sharply even after the BoJ raised interest rates to their highest level in 31 years.
What this adds
The Japanese yen's weakening despite the BoJ's rate hike is a shift from previous trends, where the yen typically strengthens after rate hikes. The unexpected dissents against the rate hike and the focus on future policy signals have contributed to this unusual market reaction.
Background
The Japanese yen weakened despite the Bank of Japan's (BoJ) expected rate hike, as investors focus on future policy signals.
What's confirmed
- The Japanese yen weakened significantly despite the Bank of Japan (BoJ) raising interest rates to 1.25%, signaling an acceleration in the pace of rate hikes. The move, expected in September, follows a rate hike in June as the central bank seeks to address rising prices amid higher crude oil prices and a weak yen.
- Despite the rate hike being largely priced in, investors are primarily focusing on signals regarding the future path of monetary policy. Governor Ueda’s comments that a 25-basis-point hike “is not necessarily set in stone” and that back-to-back rate hikes could be a possibility have tempered expectations.
- The US dollar remains firm, with traders pricing in about a 60% chance of an interest rate hike at the US central bank’s policy meeting, according to the CME FedWatch Tool. US Treasury Secretary Scott Bessent had also called for further interest rate hikes and support for the yen during recent meetings with Japan’s finance minister and the BoJ governor.
- The yen’s negative reaction may appear counterintuitive following another monetary policy tightening. However, the two surprise dissents against the rate hike have weighed on the yen, extending its losses.
- The Japanese yen surged to a one-month high against the US dollar, with the dollar falling as much as 1.5% to around ¥156.17. The speed of the move raised questions about official intervention, though no confirmation was provided.
- The yen had gained 1.6% against the dollar earlier in September as traders anticipated a faster tightening cycle and signs emerged that Japanese investors were beginning to repatriate funds.
- Global stocks and bonds slipped on Friday as investors assessed a week of increasingly hawkish central-bank policy, while the Japanese yen weakened sharply even after the BoJ raised interest rates to their highest level in 31 years.
What's still developing
- The Japanese government on Friday decided to raise single-entry visa fees for foreigners fivefold to 15,000 yen ($90) from 3,000 yen beginning in July, marking the first increase since 1978 amid inflation and the yen’s depreciation.
- The hikes are expected to bring Japan’s visa issuance fees closer to the levels implemented by the Group of Seven countries.
- Reviewed by Rami Haddad, Editor-in-Chief · Last update: 2026.09.10 The Japanese yen rose against a basket of major and minor currencies in Asian trading on Thursday, extending its gains against the US dollar for a fourth consecutive day and moving toward a retest of its seven-month high, supported by continued weakness in the US currency ahead of key inflation data in the United States.
- • The US dollar fell 0.15% against the yen to ¥153.29, from an opening level of ¥153.51, after recording a session high of ¥153.74.
- • The yen ended Wednesday up 0.3% against the dollar, marking its third consecutive daily gain.
- The dollar index fell on Thursday, extending losses for a fourth consecutive session and approaching a three-week low, reflecting continued weakness in the US currency against a basket of global currencies.
- The yield on the 10-year US Treasury note fell 0.25% on Thursday, retreating from its highest level in three years and putting further downward pressure on the US dollar.
- The US Dollar to Japanese Yen ( USD/JPY ) exchange rate plunged to 152.89 on Tuesday, extending its September fall beyond 4% as Bank of Japan tightening bets, repatriation speculation and carry-trade liquidation drove fresh Yen buying.
- The bank also expects faster BoJ tightening and sees scope for Japanese institutions to bring more capital home as domestic bond yields become increasingly attractive.
- “Potential rotation from foreign bonds into JGBs among Japanese investors, including pension funds, could support JPY.” BofA argues that higher Japanese rates would weaken the justification for maintaining large short-Yen positions.
- The dollar’s decline against the yen was reinforced by comments from Federal Reserve Governor Christopher Waller, who said he could support holding U.S. interest rates steady at the September meeting if upcoming inflation data continues to show improvement. Read also : Gold : Build Your Wealth and Freedom Waller’s position reduced expectations for an immediate Fed rate increase and narrowed the relative policy advantage supporting the U.S. dollar.
- Investors are increasingly pricing in a policy move as inflation pressures persist and the yen’s prior weakness raises import costs for Japanese households and businesses.