Japanese government bond yields jumped on Friday and the yen weakened after the Bank of Japan raised interest rates to a three-decade high, reinforcing expectations of further tightening.
Japan’s 10-year bond yield climbed to a 26-year peak, while the yen fell as much as 1% against the dollar to around 157.07, prompting profit-taking after the widely anticipated move. The BOJ lifted short-term rates to 0.75%, marking another step away from decades of ultra-loose monetary policy. Tokyo stocks took the shift in stride, with the Nikkei rising 1%.
Global equities were mixed. European shares edged up 0.1%, while Wall Street futures pointed to gains of 0.3%–0.5%, extending momentum from Thursday’s rally driven by strong results from chipmaker Micron Technology.
Analysts said the BOJ faces a delicate balancing act as Japan’s new government prepares fiscal stimulus that could weaken the yen further and fuel inflation. “Markets expect the BOJ will have to raise rates more,” said Pictet Asset Management’s Shaniel Ramjee. Capital Economics expects rates to reach 1.75% by 2027.
Elsewhere, global bond markets reflected diverging central bank paths. The Bank of England cut rates after a narrow vote but signaled caution, while the European Central Bank held firm at 2.0% and struck a more hawkish tone, dampening expectations for further easing.
In commodities, gold slipped 0.1% to $4,329 an ounce, remaining below its recent peak.
