BOJ Splits on Rate Hike, Yen Weakens

The Bank of Japan (BOJ) raised its overnight call rate by 25 basis points to 1.25% in a split decision, with two dissenting board members arguing that economic conditions weren't strong enough to justify the increase.

However, the move was seen as dovish, leading to a weakening yen and a rally in the Nikkei stock index. The BOJ's September statement noted that underlying CPI inflation had been approaching 2%, and there were risks of it deviating upwards to above the 2% price stability target.

With no updated economic projections released at this meeting, focus will now shift to Governor Ueda's press conference, scheduled for 3:30pm Tokyo time. His challenge will be to present a sufficiently hawkish case to justify the tightening path already embedded in the OIS curve.