Yen Crashes Ever‑Great (and a Bit) as BOJ Announces Surprise Rate-Boost
Picture this: The USD/JPY pair took a nosedive of 1.5 % yesterday, and it keeps sliding into June even as markets are still buzzing from the Bank of Japan’s oddball decision. The pair opened today’s session at 149.20—a sort of “down but still up” vibe that keeps traders on their toes.
BOJ’s “First Time Since 2010” Move
- It’s the second rate hike since 2007, finally pulling Japanese rates into the positive‑territory for the first time since September 2010.
- Short‑term rates jumped 15 basis points, from a frozen 0‑0.1 % to a now lively 0.15‑0.25 %.
- BOJ also announced it’ll cut its monthly JGB purchases to 3 trillion yen starting the first quarter of 2026. That’s a bold move into a new era of “tightening” that’s been absent for more than a decade.
Why the Yen Is Rolling Up A Curtain
When the news hit, the yen surged up to 149.78 against the dollar—a high point not seen since mid‑March. The market had been gasping for a reaction; a few locals in the Japanese media had sensed a change, but the official announcement still had folks up‑and‑down like a roller coaster.
With the BOJ trimming bond buying, it’s the first serious tightening in a time where most other central banks are softening. That should help the yen climb further in the medium to long run.
Global Rate Hikes vs. BOJ’s “Stay‑Alive” Policy
While the world of mainstream finance has been doing a coordinated “rate‑rise dance” through 2022 to curb post‑COVID inflation, the BOJ stayed in a rather “let it roll” mode.
Yet, Japanese CPI was up 2.8 % year‑on‑year as of June, chewing away consumers’ buying power. This slide forced BOJ officials to stay ultra‑alert, leading to a surprise hike that closed the rate gap between Japan and other economic giants.
Bank Moves that Keep the Yen Budging
- Mitsubishi UFJ Bank is raising its short‑term lending interest rate to 1.625 % from 1.475 %, in lock‑step with the BOJ move.
- The U.S. Federal Reserve held rates steady in July, but Federal Reserve Chair Jerome Powell flagged the need for robust data before the U.S. can chase price‑stability down to 2 %—which could mean a rate cut in September, adding pressure on the dollar.
So What’s the Bottom Line?
We’re looking at a yen that’s gaining a solid lift thanks to BOJ’s hawkish switch. As long as the U.S. still dangles the possibility of a September cut, the USD/JPY pair will get a push-down from the dollar’s side. But the yen’s new trip to the positive-rate zone? That might keep the battle for a stronger Japanese currency going and could, over time, shift the money‑policy balance worldwide.
Stay tuned, subscribe now, and watch the currency world spin this way around!
