The Bank of Japan raised interest rates to 1% and signaled further tightening as inflation remains above target.
The USD/JPY pair retreated to near 160.25 in European trading on Tuesday after the Bank of Japan (BoJ) raised interest rates by 25 basis points to 1%. The move, widely anticipated, lifted the Japanese Yen as the BoJ indicated a continued upward policy path.
The BoJ’s guidance emphasized that inflation is expected to stay above its target, with Deputy Governor Shinichi Uchida stating the central bank will adjust rates based on economic and price developments. The risk of a significant economic slowdown has also diminished, according to the BoJ.
Market focus now shifts to the Federal Reserve’s policy announcement on Wednesday, where rates are expected to remain unchanged at 3.50%-3.75%. Investors will scrutinize Fed Chair Kevin Warsh’s remarks for clues on future monetary policy.