The Bank of Japan raised its policy rate to approximately 1.25%. The yen weakened sharply after the announcement, with selling briefly taking it to the ¥158 level. The market focused on the fact that Governor Ueda did not give specific guidance on the pace of future rate hikes at his press conference.
On the 18th, the Bank of Japan decided to raise its target for the short-term interest rate to approximately 1.25%. In the foreign exchange market immediately after the announcement, the yen was sold sharply, briefly reaching the ¥158 level against the dollar.
The market reversed its view that a Bank of Japan rate hike would support the yen, instead moving toward further yen weakness. One factor was that 2 policy board members from the reflationist camp, which is seen as favoring monetary easing and aggressive fiscal policy, voted against the rate hike.
Regarding developments in Japan and the United States, the US Federal Reserve unanimously decided to raise interest rates for the first time in 3 years and 2 months. In response to the lack of consensus within the Bank of Japan, the market indicated that Japan's future rate-hike decisions could become more difficult.
Governor Ueda is said to have avoided specific comments on the timing or pace of future rate hikes at his press conference, which may have influenced the market's reaction. The focus going forward is whether the yen will move toward appreciation.