BoJ Hike Leaves Yen Vulnerable Amid Dovish Surprise

The Bank of Japan has raised its key rate by 25 basis points to 1.25% in a split vote, but the decision has left the Japanese Yen vulnerable.

Two board members, Toichiro Asada and Ayano Sato, dissented from the decision, arguing that without a renewed pick-up in inflation, a rate hike was unnecessary.

The decision acknowledges persistent upside inflation risks, with Japan's core inflation measure remaining above 2% throughout 2025.

Despite this, the yen weakened against the dollar after the statement, and ING continues to see upside risks for USD/JPY, with a move towards 157-160 possible in coming weeks if elevated oil prices persist and the Federal Reserve hikes again.