BoJ Rate Hike Fails to Boost Yen Amid Dovish Market Reaction
The Bank of Japan (BoJ) raised its key interest rate by 25 basis points to 1.25%, its highest level since 1995, as expected.
Despite this decision, the yen suffered its worst daily drop in nine months, with the dollar jumping 1.2% against the currency to a two-week high of 157.84 yen.
The market reaction was seen as dovish, with traders seizing on Governor Kazuo Ueda's caveat that monetary policy will remain accommodative enough to support growth.
Ray Attrill, head of FX strategy at National Australia Bank, said the BoJ 'has just clearly underwhelmed versus expectations here.'
The decision was split 7-2, with board members Toichiro Asada and Ayano Sato dissenting. They are seen as reflationists and were appointed by Prime Minister Sanae Takaichi earlier this year.
Inflation data released that morning pointed to a slowdown in core inflation, which eased to 1.7% in August from 1.8% in July, the first slowdown in four months.