BoJ Rate Hike Falls Flat as Yen Continues Downward Slide
The Bank of Japan (BoJ) raised its policy rate by 25 basis points to 0.75% on December 19, 2025, but the move failed to steady the yen. After Governor Kazuo Ueda's press conference, the dollar climbed above 157 yen, Japanese government bond yields surged, and the Nikkei 225 ended about 1% higher.
The market reaction was more telling than Ueda's statement. The yen weakened after he spoke, with USD/JPY rising above 157.10 from around 155.80 before the decision. Japan's 10-year government bond yield climbed above 2%, its highest level since 1999.
UBS Securities chief Japan economist Masamichi Adachi captured the market mood when he said, 'The market was looking for clear hawkish signals... Ueda's comments alone almost sounded like the rate hike cycle could end soon.'