Japan’s central bank lifts borrowing costs to 1% amid inflation concerns, prompting a modest pullback in the yen’s earlier rally.
The Bank of Japan increased interest rates by 25 basis points to 1%, matching market expectations. The move comes as policymakers seek to curb inflationary pressures fueled by rising energy costs and geopolitical tensions in the Middle East.
The yen initially strengthened but surrendered some gains during Asian trading, with the EUR/JPY pair rebounding from a low of 185.45 to near 185.65. The currency remains 0.12% higher than Monday’s close. Markets had priced in the hike, reflecting concerns over persistent price increases.
Investors now await guidance from Deputy Governor Shinichi Uchida, who will address the media in place of hospitalized Governor Kazuo Ueda. The euro also advanced against peers following hawkish signals from European Central Bank officials.