BoJ Rate Hike Fails to Strengthen Yen Amid Market Anticipation

The Bank of Japan (BoJ) raised its policy rate to 1.25% in a 7-2 decision, but this move failed to strengthen the yen against the US dollar. The USD/JPY currency pair instead traded above 157.00 and rose to around 157.

This unexpected weakness of the yen is attributed to the market's anticipation of the rate hike, which was priced in beforehand. As a result, the currency pair reacted more to the tone and split vote within the BoJ than to the hike itself.

The recent speculation about a larger-than-expected rate hike created uncertainty over the likelihood of back-to-back moves. However, with Japan's core inflation slowing down to 1.7%, there is little economic pressure on the BoJ to raise interest rates further in the near future.