BOJ Rate Hike Stuns Markets with Unexpected Weak Yen

The Bank of Japan (BOJ) has raised its policy rate to 1.25%, marking the highest level since 1995, just three months after the previous move.

This decision came as a surprise to markets, which normally react to rate hikes by strengthening a currency, lifting bond yields, and weighing on stocks.

Instead of following this playbook, the yen weakened beyond 157 per U.S. dollar, the 10-year Japanese Government Bond yield slipped, and the Nikkei 225 climbed around 1.5%.

The BOJ's decision was not as hawkish as traders expected, with a policy vote split 7-2 between those in favor of increasing rates and those who opposed it.