Yen Weakens as Traders Parse Ueda Remarks

The Japanese yen weakened past 157 per dollar on Friday, hitting two-week lows after the Bank of Japan raised interest rates in a widely telegraphed move, with two officials dissenting to the decision. Traders also parsed Governor Ueda's post-meeting comments, saying the BOJ remains committed to raising rates and adjusting the extent of monetary accommodation based on evolving economic conditions. However, Ueda added that easy monetary conditions are expected to be maintained to support economic growth. The central bank lifted its policy rate by 25 bps to 1.25%, the highest since April 1995, as policymakers seek to curb persistent inflationary pressures. The hike was opposed by board members Asada and Sato, highlighting some resistance to a quicker tightening cycle. The yen also faced pressure from bets that Japan’s rate-tightening cycle could lag behind the Fed’s pace of increases, following the US central bank’s hawkish rate hike earlier this week.

The Nikkei 225 Index advanced 1.38% to finish at 65,019 on Friday, extending its winning streak to three sessions after the Bank of Japan raised its policy rate by 25 basis points to 1.25% in a widely telegraphed move. The decision was not unanimous, however, as board members Toichiro Asada and Ayano Sato opposed the increase, signaling some resistance to a more rapid pace of policy tightening. Despite the dissent, Governor Kazuo Ueda said at the post-meeting press conference that the BOJ remains prepared to raise rates further and adjust the level of monetary easing as economic conditions evolve. Meanwhile, official data showed Japan’s core inflation slowing to 1.7% in August from 1.8% in July, its first decline in four months. Technology and AI-related shares led the market higher after similar gains on Wall Street overnight, with Kioxia (9.4%), SoftBank Group (1.1%), Advantest (6%), Lasertec (8.7%), and Taiyo Yuden (4.2%) among the notable advancers.

The Japanese yen weakened to around 157 per dollar on Friday, touching two-week lows after the Bank of Japan delivered a widely anticipated interest-rate hike. The central bank lifted its policy rate by 25 basis points to 1.25%, its highest level since April 1995, as policymakers contend with persistent inflationary pressures and ongoing disruptions from the Middle East. The decision was not unanimous, however, with board members Toichiro Asada and Ayano Sato voting against the increase. Attention now turns to the BOJ’s guidance on the scope and timing of further policy tightening. Analysts have indicated that Japan’s tightening cycle may struggle to match the pace of Federal Reserve rate increases, following the Fed’s hawkish hike earlier this week. Meanwhile, Japan’s core inflation slowed to 1.7% in August from 1.8% in July, marking its first decline in four months.