BOJ Rate Hike Sends Yen to Two-Week Low Amid Split Vote

The Bank of Japan raised its policy rate by 25 basis points to 1.25% on Friday, marking its highest level since 1995. The decision was widely anticipated, with nearly 90% of economists surveyed by CNBC expecting a quarter-point hike.

However, the vote was not unanimous, with two policymakers, Toichiro Asada and Ayano Sato, dissenting from the decision. Both Asada and Sato are viewed as reflationists and argued that the economic situation might not be strong enough to justify another increase.

The BOJ's decision comes against a complicated backdrop for Japan's policymakers. Inflation remains close to the 2% target, while the yen continues to trade at historically weak levels against the dollar. The central bank said it acted because of the risk that inflation could deviate upward beyond its target.

The market reaction was unexpected, with the dollar climbing 1.2% against the yen to 157.84, its highest level in two weeks. This move put the Japanese currency on track for its biggest daily decline against the dollar since December and its strongest weekly loss since September 2024.