The yen weakened in volatile trading on Friday after the Bank of Japan raised interest rates as expected but offered little clarity on the pace of further tightening, prompting investors to sell the currency.
The BOJ lifted its policy rate to 0.75% from 0.5%, a move widely anticipated by markets. The yen initially slipped on the announcement and extended losses after Governor Kazuo Ueda avoided specifying when or how quickly rates might rise again. The currency was last down 0.6% at 156.53 per dollar. The euro climbed to a record 183.25 yen, while sterling rose 0.5%.
While the BOJ maintained that underlying inflation should converge around its 2% target by the latter half of its projection period through fiscal 2027, dissenting board members struck a more hawkish tone, arguing the target has already been met or will be reached sooner. The central bank reiterated that real rates remain significantly low and said it would continue tightening if economic conditions evolve as forecast.
Elsewhere, currency markets reflected diverging central bank signals. The euro steadied after ECB President Christine Lagarde pushed back against hawkish expectations, while sterling held near $1.34 after the Bank of England cut rates in a closely split vote. The dollar index edged 0.2% higher.
In Asia-Pacific trade, the Australian and New Zealand dollars eased, while China’s yuan remained firm near a one-year high. Cryptocurrencies rebounded, with bitcoin up 2.5% and ether gaining more than 4%.
