FX.co ★ Yen Weakens as BOJ Hikes Rates

The Japanese yen weakened to around 157 per dollar on Friday, slipping to a two-week low after the Bank of Japan delivered a widely expected interest rate hike. The central bank raised its policy rate by 25 basis points to 1.25%, the highest level since April 1995, as policymakers grapple with persistent inflationary pressures and ongoing disruptions stemming from the Middle East.

The decision was not unanimous: board members Toichiro Asada and Ayano Sato voted against the increase. Markets now turn their focus to the BOJ’s guidance on the scope and timing of any further policy tightening. Analysts suggest that Japan’s tightening cycle is unlikely to keep pace with the Federal Reserve’s, particularly after the Fed’s hawkish rate hike earlier this week.

In the background, Japan’s core inflation eased to 1.7% in August from 1.8% in July, marking its first decline in four months.