BoJ hike

BoJ hike

In a momentous departure from years of extensive monetary stimulus, the Bank of Japan (BoJ) concluded an eight-year period of negative interest rates. This move triggered a decline in the yen's value and a drop in Japanese government bond yields, illustrating the classic phenomenon of "buy the rumour, sell the fact."

The BoJ elevated its primary short-term interest rate to approximately 0% to 0.1% from its previous -0.1%, marking Japan's first rate increase since 2007. This decision came as inflation had surpassed the central bank's 2% target for over a year, alongside major companies in the country agreeing to the most significant wage hikes in 33 years. Concurrently, the central bank ceased its yield curve control for 10-year government bonds. However, in its policy statement, the bank affirmed it would continue purchasing bonds at similar levels, indicating that the BoJ isn't adopting a hawkish stance.

Despite interest rates remaining close to zero, the yen continues to function as a funding currency and is expected to continue being utilized for carry trades. Consequently, the yen has depreciated broadly against other currencies, with USD/JPY surpassing the ¥150 mark and GBP/JPY approaching ¥191—levels close to its highest point since 2015.

Please note:  The news and information contained on this site should not be interpreted as advice or as a solicitation to offer to convert any currency or as a recommendation to trade.

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