BOJ Hikes Rates to 31-Year High, Dovish Dissenters Question Further Tightening

The Bank of Japan (BOJ) raised interest rates to a 31-year high on Friday, but its readiness to push up borrowing costs further was questioned due to two dissenting board members. The BOJ increased its policy rate to 1.25% from 1%, but this move failed to support the yen, which fell as investors focused on the lack of explicitly hawkish guidance.

The decision came after rate hikes by European and US central banks, highlighting the global focus on inflation risks driven by oil price spikes, expansionary fiscal policies, and AI investment. The BOJ's policy rate is now closer to levels deemed neutral to the economy, marking a step away from decades of ultra-low rates.

However, the yen sank to 156.91 per dollar after the announcement, as the usual 25-basis-point hike and dovish dissenters tempered expectations of bolder tightening. BOJ Governor Kazuo Ueda's press conference is expected to provide clues on the pace and timing of future rate hikes.