BOJ Keeps Rates Steady, Signals Hawkish Resolve Amid Yen Intervention

The Bank of Japan (BOJ) maintained interest rates at 1% on Friday, but delivered a hawkish signal that it will continue to raise borrowing costs in response to economic developments. The decision was widely expected after a rate hike to a 31-year high just last month.

Board member Hajime Takata was the sole dissenter to the decision, calling for a rate hike to 1.25% to respond to inflationary risks from external demand shocks.

The BOJ's statement emphasized its resolve to continue pushing up borrowing costs, citing developments in the Middle East, expansion in AI-related demand, and exchange-rate fluctuations as key factors to consider in future rate hikes.

Meanwhile, Japan conducted a yen-buying intervention on Thursday, which failed to give the currency lasting support. The government's action was seen as having the blessing of Washington, with U.S. Treasury Secretary Scott Bessent stating that the BOJ may have intervened to prop up its undervalued yen currency.