The Bank of Japan raised its policy rate by 25 basis points, lifting the target range from 1.00% to 1.25%, the highest level in 31 years, in line with market expectations. This move marks the shortest interval between rate hikes since June and the first such rapid tightening since 1990.
Bank of Japan Governor Kazuo Ueda will explain the rationale behind this decision and the outlook for interest rates over the coming months at the press conference that typically begins. The foreign-exchange market has shifted its focus from "whether there will be a rate hike" to "how many more hikes are still ahead."
Several institutions believe that if the Bank of Japan fails to signal a more aggressive tightening than currently expected, the yen could continue to weaken following the policy decision. A Reuters survey indicates that markets broadly anticipate further rate hikes, with the benchmark rate projected to reach 1.5% by the end of March 2027 and climb to 1.75% in the second quarter.