The Japanese Yen (JPY) experienced a sharp sell-off against the Greenback on Friday, sending the USD/JPY pair to a one-month high of 157.48, an increase of nearly 1.20%. This broad weakness followed the Bank of Japan’s (BoJ) decision to raise interest rates by 25 basis points to 0.75%, the highest level in thirty years. While the BoJ expressed confidence in a wage-driven inflation recovery toward its 2% target, the market reacted to the bank’s emphasis that real interest rates remain “significantly negative” and that accommodative conditions will persist.
The rate hike also pushed the 10-year JGB yield above 2.0% for the first time since 1999, sparking concerns over Japan’s debt-servicing costs. Despite warnings from Finance Minister Satsuki Katayama regarding “excessive” currency moves, the Yen remained under pressure. Meanwhile, a resilient US Dollar provided additional tailwinds for the pair, even as softer US Consumer Sentiment data from the University of Michigan suggested potential limits to the Dollar’s long-term strength.
