BOJ Interest Rate Hike Sparks Surprise Yen Weakness
The Bank of Japan (BOJ) conducted its monetary policy meeting on July 30 and 31. The BOJ had been conducting money market operations in accordance with the guideline for money market operations decided at the previous meeting on June 15 and 16, 2026.
The uncollateralized overnight call rate was within the range of 0.976 to 0.981 percent during this period. Additionally, the BOJ conducted Japanese government bond (JGB) purchases of about 2.7 trillion yen per month in June 2026. However, it reduced the monthly purchase amount by approximately 200 billion yen to about 2.5 trillion yen per month in July 2026.
The market has largely moved past the July decision and is now focused on the outcome of the September meeting. The BOJ's decision to hike interest rates was seen as a surprise, given that it was expected to be more dovish. As a result, the yen weakened against the US dollar, with USD/JPY pushing past 157.