Yen Tumbles Despite BoJ Rate Hike as Dovish Sentiment Prevails

The Bank of Japan (BoJ) raised its key interest rate to 1.25%, its highest level since 1995, but the move failed to boost the yen as expected.

The dollar surged 1.2% against the currency to a two-week high of 157.84 yen, marking its largest daily gain since December and biggest weekly rally since September 2024.

The decision was split 7-2, with board members Toichiro Asada and Ayano Sato dissenting. They are seen as reflationists appointed by Prime Minister Sanae Takaichi earlier this year.

Governor Kazuo Ueda reaffirmed the central bank's commitment to further rate hikes but also emphasized that monetary policy will remain accommodative enough to support growth, which traders saw as dovish.