NZD/JPY Tumbles on BoJ Hawkishness and Oil Shock
New Zealand's dollar fell over 1% against the Japanese yen despite the Reserve Bank of New Zealand (RBNZ) hiking interest rates for a second consecutive time. The RBNZ raised its official cash rate to 2.75%, but markets were disappointed by the central bank's gradual guidance, which suggested further hikes would come at a slower pace than expected.
The decline in NZD/JPY was driven by several forces, including an Iran-driven oil shock that reduced global risk appetite and encouraged carry reduction. The yen also strengthened due to increasingly hawkish rhetoric from the Bank of Japan (BoJ), which is now seen as preparing for faster tightening after a signal from US Treasury Secretary Scott Bessent.
BoJ board member Hajime Takata's comments in Sapporo that 2026 would be a 'regime change' and that policy should become 'nimble and data-dependent' reinforced expectations of faster normalization. The RBNZ's gradual guidance, on the other hand, disappointed markets looking for a more aggressive hiking path.