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2026-09-18 19:04:09
[Bank of Japan Initiates Fastest Rate Hike Cycle in Decades, Yen Remains Under Pressure] ⑴ The Bank of Japan raised its policy rate by 25 basis points to 1.25%, a 31-year high. This was a split vote and the sixth rate hike since the governor took office. ⑵ This rate hike comes only three months after the last one, the shortest interval since 1990, as inflation risks continue to accumulate and the central bank warned that prices could rise further above the 2% target. ⑶ However, two committee members voted against the rate hike, indicating increased resistance to a faster tightening path, making the decision appear more dovish than it appears. ⑷ Despite the rate hike, the dollar rose about 1.1% against the yen to about 157.7 after the central bank governor's briefing, as the central bank did not provide further guidance on the pace of future rate hikes. ⑸ This move also follows unusually strong pressure from the US Treasury Secretary, who is pushing Japan to take stronger measures to support the yen, which remains well below its July level of around 163-164 after intervention by the US and Japan. (6) The central bank also stated that it will continue to raise interest rates if the economic and price outlook is met, leaving room for another rate hike before the end of the year. The market is pricing in an 85% probability of a rate hike in December. (7) Japan is raising interest rates, but a more hawkish and decisive stance is needed to boost the yen.
