Yen weakens to 157.50 despite BOJ rate hike to 1.25%

  • Bank of Japan raised its policy interest rate from 1.0% to 1.25%.
  • The yen fell 1.80 yen to 157.48–50 per dollar at 5 p.m.
  • Asada and Sato opposed the hike in the BOJ’s 7–2 decision.

The yen weakened to the upper-157 range against the dollar in Tokyo on the 18th, despite the Bank of Japan raising its policy interest rate by 0.25 percentage point to 1.25%. The decision matched market expectations, but the 7–2 vote, with board members Asada and Sato dissenting, reduced expectations for an accelerated series of future hikes. The yen reached 157.50 in afternoon trading and stood at 157.48–50 per dollar at 5 p.m., down 1.80 yen from the previous day. Softer-than-expected August consumer price data had already pressured the yen, while the Federal Reserve's rate increase and potential for further tightening limited expectations that the Japan-U.S. interest rate gap would narrow quickly. The euro traded at 180.87–91 yen, up 2.25 yen. Eight of 10 Japanese foreign exchange experts surveyed by Nikkei expected the yen to weaken again toward year-end, citing the rate differential, higher international crude oil prices and a deteriorating trade balance. Attention now turns to economic data, BOJ officials' comments and the economic and price outlook for clues about a possible December hike.

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