Japanese Yen: Dovish BoJ hike keeps Yen vulnerable – ING
ING’s Frantisek Taborsky reports that the Bank of Japan delivered a 25bp hike to 1.25% in a split decision, acknowledging persistent inflation risks but with notable dissent.
The Bank of Japan (BoJ) increased its key interest rate by 25 basis points to 1.25%, sparking a decision with a split vote. This move acknowledged persistent inflation risks, though two dissenting board members argued that a rate hike was unnecessary without a renewed uptick in inflation. The Japanese yen weakened following the dovish statement, and ING sees upside risks for USD/JPY, potentially reaching the 157-160 range if oil prices stay high and the Federal Reserve raises rates again.
The decision came despite core Japanese inflation measuring above 2% throughout 2025 and the BoJ expecting inflation to stay above target in the coming years. The two dissenting members, appointed by Prime Minister Sanae Takaichi, raised concerns that without further inflation pick-up, another hike this year might not be warranted.
This surprise dovish move highlights the high standards set by the Federal Reserve and suggests the dissenting members may increasingly act as a brake on further policy tightening.
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