Japan finally hikes rates to 1% highest since 1995, Yen still stuck weak near 160 despite the move

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‼️The Bank of Japan just crossed a historic threshold:

The BoJ raised its benchmark interest rate by +25 basis points to 1.0% at its June 16 policy meeting, the highest since 1995, in a 7-1 vote.

The BoJ also announced it would pause its government bond purchase reduction program from April 2027, keeping monthly purchases steady at ~2 trillion yen, or ~$12.5 billion.

This comes as persistent yen weakness, hovering near 160 per US Dollar, and Iran war-driven energy price pressures continue to push Japanese inflation higher.

The BoJ also dropped language describing borrowing costs as “significantly low,” a signal that the rate may be approaching the lower range of its neutral level.

The ECB raised rates last week, while the Fed is expected to hold at this week’s meeting, though speculation over a US rate hike by year-end is building.

Markets are now pricing a 52% probability of another BoJ rate hike by October, with most economists expecting hikes roughly once every 6 months.

Japan is hiking, but is still way behind the curve.